Royal Assent

Lord Irvine of Lairg: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Act:
	Consolidated Fund (No. 2) Act.

House of Lords Reform

Lord Geddes: asked Her Majesty's Government:
	Whether, in the context of their proposals for House of Lords reform, they consider that the elected element will constitute a more legitimate body of membership within the House than the unelected element.

Lord Williams of Mostyn: My Lords, I do not consider that one type of Member in the reformed Chamber will be more legitimate than any other type. All Members of this House will be equally legitimate.

Lord Geddes: My Lords, I thank the noble and learned Lord for that reply. He always gives such replies so graciously. Can he advise the House where that reply leaves the doctrine of his immediate predecessor Lord Privy Seal?

Lord Williams of Mostyn: My Lords, absolutely intact. The reformed House will be the subject of a constitutional settlement approved by Parliament, as the present House is the subject and the consequence of a constitutional settlement approved by Parliament.

Baroness Williams of Crosby: My Lords, I congratulate the Leader of the House on the brilliance of his reply. I want to press him further on the point raised by the noble Lord, Lord Geddes. Does he accept that there is a danger of there being two classes of Peer, one elected and the other appointed? Does he also accept that, to sustain the legitimacy and the appropriate democratic role of this House, there is a strong case that those who accept a party Whip should be elected and that those who decide to retain their independence, on the grounds of their expertise and experience, may be appointed? That would meet the charge that some noble Lords are "cronies", an unacceptable charge and one that should be fully repudiated.

Lord Williams of Mostyn: My Lords, there will not be two classes of Member. All Members will be equal, as George Orwell intended to point out. Speaking as one who was put here on the recommendation of Mr Major, I never thought that I had an obligation to be one of his cronies. I say quite seriously that I do not detect any subservience or desire to be ruled by others among any noble Lords, whether Bishops, lifers, hereditary Peers or others.

Lord Strathclyde: My Lords, we shall return to the matter of legitimacy many times over the course of the next few months, particularly if the Government publish a Bill. It is important to understand the Government's thinking behind this subject. If, as the noble and learned Lord has said, directly elected Members of this House will have no greater legitimacy than appointed Peers, what is the point of having them?

Lord Williams of Mostyn: My Lords, to add a certain degree of variety that may be needed, and to give the representation that is specified in the Royal Commission's report to different sections of national life that may be under-represented at the moment. I stress that if the reform comes about it will be a constitutional settlement agreed and approved by both Houses.

Lord Davies of Coity: My Lords, does my noble friend agree that some difficulties could arise as a result of elected Members representing constituencies, whereas the rest will not have constituencies?

Lord Williams of Mostyn: My Lords, I do not believe that to be the case. The Bishops of the Church of England as established by law are Members of the House partly to represent a particular constituency of religious opinion. Of course, they also reflect much wider aspects of national life. There is no difficulty, except for those who want to find one.

Earl Ferrers: My Lords, will the noble and learned Lord ask the Government to open their eyes a little wider so that they realise that elected Members in this House will alter the authority of the House of Lords and another place? The other place will hate the idea of an elected second Chamber and there will be endless trouble.

Lord Williams of Mostyn: No, my Lords. It is worth looking at the preamble to the Royal Commission's report and the basis upon which that commission pursued its inquiries and conclusions. That makes it perfectly plain that the House of Commons is to be supreme. It is to be supreme as the legislative organ and if it insists it must have its own way; and it is entirely supreme in relation to taxation. No changes to either of those bases will be proposed.

Lord Boardman: My Lords, does the noble and learned Lord recognise that votes last week showed quite clearly that the views of this non-elected House represent the views of the public, as was widely shown afterwards, rather than the views of the elected House?

Lord Williams of Mostyn: My Lords, I am not sure about that. It depends on which poll one reads. I take the point made by the noble Lord. This House, although non-elected, discharged what it took to be its duty.

Lord Elton: My Lords, does the Leader of the House accept that if in future Members of this House—however it is to be composed—are to be paid a living salary, the country will be governed by two Chambers out of touch with real life?

Lord Williams of Mostyn: My Lords, not really. I believe that outside this House most people's aspiration is to have a living salary.

Manufacturing Industry

Lord Roberts of Conwy: asked Her Majesty's Government:
	Whether they have any plans to revive manufacturing industry in the United Kingdom.

Lord Sainsbury of Turville: My Lords, the Government recognise the difficulties that UK manufacturers are experiencing because of the slow-down in the world economy.
	We are helping UK manufacturing industry to drive up productivity and to increase competitiveness. We are doing that by providing a stable fiscal environment, by investing in basic science, by pursuing a strong competition policy, by investing in transferable basic skills and in infrastructure, by actively promoting knowledge transfer between universities and industry and by supporting exports, regions and small business.

Lord Roberts of Conwy: My Lords, I am grateful to the Minister for that reply. Will he confirm that after two consecutive quarters of negative growth manufacturing is now in recession? Does that situation not call for other special measures such as exemption from the climate change levy, or has manufacturing ceased to occupy the central position in the Government's industrial and economic plans?

Lord Sainsbury of Turville: My Lords, as I have said, we recognise that there is a fall in output in manufacturing industry. That does not require us to take emergency measures, such as changing the climate change levy. But, as was shown by the fact that we had the manufacturing summit recently, we take the performance of manufacturing industry extremely seriously. We shall continue to support it as necessary to increase its productivity and competitiveness.

Lord Razzall: My Lords, does the Minister accept, having been asked this Question probably six times in this House since the Summer Recess, that this is a serious issue? Does he further accept that there are really only two policies that Her Majesty's Government can pursue? The first one, which seemed to be the answer that the noble Lord was giving, is to do very little and allow the decline of manufacturing industry to be left to the market place. The alternative is to have a proactive fiscal and monetary policy in order to preserve our manufacturing industry, including—dare I say—making plans to go into the euro. Which of those two policies do the Government propose to adopt?

Lord Sainsbury of Turville: My Lords, I thank the noble Lord for asking that question. He has asked it every time this issue has been raised. I shall give the same answer as I have given before. I do not think that the failed policies of the past, in terms of either fiscal or monetary stimulation, are the right policies to pursue. What industry wants and has always said it wants is stability in these areas. Equally, to go into the euro, which is what the noble Lord has in mind, without the five tests being passed would be a great mistake.

Lord Jones: My Lords, is my noble friend aware that in my former constituency some £250 million is currently being invested in the Airbus factory? It is a world leader in wing technology and wing production to the tune at the moment of over 4,000 jobs. Is he further aware that the aerospace manufacturing industry in Britain now earns nearly £5 billion a year for our country, employs over 40,000 skilled workers and is the last great reservoir of skills? Therefore, will the Government bring forward their plans to buy the heavy lift aircraft, the A400M? Will they increase the already notable research and development grants that they give to BAe Systems and to Airbus? Without the aerospace industry Britain would be in serious industrial trouble.

Lord Sainsbury of Turville: My Lords, I totally agree that the aerospace industry is one of the best performing industries in this country and is a notable example of where we have world-class manufacturing which can compete against any other country in the world. I do not think that it is the last reservoir of skills in this country. There are other industries, such as the biotechnology industry and pharmaceuticals, which equally are world-class industries. There are many more to which we should give more recognition . The particular measures mentioned by my noble friend are constantly under review.

Baroness Miller of Hendon: My Lords, is the Minister aware of the letter that his noble friend Lord McIntosh received from the glass manufacturers on 3rd December after a similar Question was asked in the House about the climate change levy? The letter from the glass manufacturers said that a disproportionately large amount of money is taken by the climate change levy—they called it a tax, as I did—from this very delicate industry. Is the noble Lord aware that Pilkington pays £1.75 million and gets £44,000 back and Potters of Barnsley Ltd pays £175,000 and gets only £2,000 back? Do the Government still maintain that what we call a tax and they call the climate change levy is actually still tax neutral especially as far as concerns the manufacturing industry?

Lord Sainsbury of Turville: My Lords, I am not aware of the letter to which the noble Lord referred. I have been in contact with a number of industries that are in a similar position, such as the plastics and rubber industry. They have made the same point. The position is that the levy is revenue neutral across the private sector. We have never said that it is revenue neutral on a particular industry or a particular company where clearly it is not the case, but across the whole of the private sector it is revenue neutral and therefore not a tax.

Lord Dormand of Easington: My Lords, will my noble friend tell us what plans the Government have to revive manufacturing industry—or, indeed, any kind of industry—in the North East of England?

Lord Sainsbury of Turville: My Lords, I am glad to say that One North East is a good regional development agency and has taken extremely effective action to support particular clusters of industry in the North East. We want to give regional development agencies more scope so that they can play a part in increasing innovation and productivity within regions.

Lord Ezra: My Lords, does the noble Lord agree that our adverse balance on visible trade is now at an all-time high and rising? Of course, that means that we are importing vastly more manufactured goods than we are exporting. Is not that of grave concern? If that had occurred a few years ago, it could have led to a governmental crisis but it now seems to be totally ignored.

Lord Sainsbury of Turville: My Lords, it is obviously an issue of concern. We now have proper control of public finances, so that does not inevitably lead to a crisis across the whole of the Government's financial policy, as it has done in the past.

Lord Campbell of Croy: My Lords, does the Minister accept that the climate change levy is haphazard in its impact? The return—the refund—entirely depends on a firm's number of employees, because it is the return of national insurance contributions.

Lord Sainsbury of Turville: My Lords, that is not a random situation. There will not always be perfect equity between every company, but it seems to us the best method of recycling the money to companies—no better method has been suggested.

Lord Trefgarne: My Lords, while declaring an interest in training matters, as set out in the Register, is the Minister satisfied that there will be an adequate supply of skilled personnel—especially engineers—for manufacturing industry now and in future?

Lord Sainsbury of Turville: My Lords, the question of the supply of skilled engineers is extremely important. There are severe gaps in some key areas. That is why we are taking action, such as the restructuring of the Engineering Council to turn it into the Engineering and Technology Board, so that we can do more to drive up the supply of engineers throughout the economy.

Rights of Way Maps

Lord Greaves: asked Her Majesty's Government:
	Whether they intend to open up open country and registered common land under Section 2(1) of the Countryside and Rights of Way Act 2000 by way of commencement orders on a regional basis as and when the conclusive maps have been published for each region.

Lord Whitty: My Lords, we are carefully considering whether to proceed by way of commencement orders on a regional basis. We expect to announce our intentions soon after the consultation on the draft maps in the first two mapping regions is completed in February next year.

Lord Greaves: My Lords, I thank the Minister for that half encouraging Answer. Will he pass on congratulations from these Benches to the Countryside Agency on the way in which, so far, it is adhering to its fairly rigid timetable? It has issued the first two draft maps for the South East and what is somewhat oddly called the lower North West regions on time. That is extremely encouraging. Would it not cause problems if conclusive maps for those first two regions were published perhaps more than two years ahead of the conclusive maps for other parts of the country, so that everybody knew where the new access land was to be during a long period when access was still not possible? Would that not be a recipe for confusion and confrontation?

Lord Whitty: My Lords, I am happy to pass on the noble Lord's thanks to the Countryside Agency, which has a difficult task but has completed those draft maps. Clearly, we need to consider from the reaction to those draft maps what problems may follow in other regions before we take a definitive decision on whether producing conclusive maps should lead to the commencement orders applying to those two regions or a slightly larger number of regions, or whether we should wait until the full mapping process has been completed. We shall consider that next spring.

Earl Peel: My Lords, is the Minister aware that in the two areas where mapping has started—the South East and the North West—considerable areas of land have been mapped that have no bearing whatever on open country? That is causing considerable distress to those involved. For example, in Kent, I know of at least two private parks that have been designated. Parks are exempt under the Act. In the north-west of England, much in-bye land, which has nothing to do with open access, has been designated. Will the Minister tell his department to inform the Countryside Agency to inform the mapping authority that it must withdraw its horns and go back to designating open country and leaving land that is totally unsuitable under the Act?

Lord Whitty: My Lords, there are exceptions to the designation of open countryside, but the noble Earl will recall, from long hours of discussion, that the Act includes two processes: one is the mapping of open countryside and the other is the exceptions to the mapping. It may well be that land has been mistakenly designated—no doubt comments on the draft maps will make that clear—but, within open countryside, parks, gardens and in-bye land may be designated, some of which may subsequently be exempted under the provision to which the noble Earl refers. Parkland and gardens are exempted, but we are only at the first stage of a two-stage process.

Lord Bridges: My Lords, has the Minister's attention been drawn to an article in a Sunday newspaper that reveals an extraordinary case of an internationally known botanical garden that has been classified as open countryside, which it manifestly is not? Will he urge the Countryside Agency to consider the maps with extreme care and to take into account objections to them? If the Countryside Agency turns a deaf ear to such complaints, will it be possible to proceed to judicial review?

Lord Whitty: My Lords, it is wrong to start talking about judicial review when we are at an early stage of a process on which we spent much time during the passage of the Act. The draft maps are for comment. Exceptions are then made to areas designated as open country or common land. That process will continue as set out in the time-scale announced by the Countryside Agency. Most of the problems with the two regional maps produced so far and subsequent maps should be resolved during that process. The issue of judicial review therefore does not arise.

Baroness Miller of Chilthorne Domer: My Lords, I am sure that the Minister will recall our discussion during the passage of the Act about the need for adequate resources to be given to the local authorities in the areas in which much open land will fall to provide access—stiles, information points and so on. What assessment is his department carrying out in order to recommend to the Department of Transport, Local Government and the Regions what extra resources will be needed?

Lord Whitty: My Lords, we committed ourselves in the Act fully to fund the additional duties that it imposes. We identified the appropriate allocation for local authorities at this point in the process as being between £12 million and £19 million. That is necessary if we are to achieve the rapid enactment of the process.

Baroness Gibson of Market Rasen: My Lords, does my noble friend agree that the Countryside Agency has done well in the way that it has produced its maps—in particular, by consulting widely? Wide consultation is under way at present. Does he agree that the consultation and the mapping process should produce something that will enable more people to gain great pleasure from our countryside?

Lord Whitty: My Lords, yes, and the passing of the Act provides that possibility. However, the process under which it is being implemented gives to those who want to use the right of access and to those who are land owners or managers the right to comment on the draft maps. At the end of that process, when a provisional map is introduced, landowners have a right of appeal against it.
	I believe that safeguards have been built in for everyone and that the final result will be of great benefit to those who want to use our countryside.

Baroness Byford: My Lords, first, I want to press the Minister on the early introduction of land. Secondly, will he reconsider the definitions of mountain, moor, heath and down, which we were unable to establish? The lack of definition is leading to the inclusion on the maps of areas of land which were never intended for inclusion.
	Furthermore, why, as I understand it, are farmers to be charged £15 and £5 respectively for obtaining the maps when previously Ordnance Survey maps were provided free of charge? I cannot overemphasise the disquiet that that situation is causing in the countryside.

Lord Whitty: My Lords, I do not believe that to be the case. People have recognised that the process is open and will give landowners in particular rights to object or to suggest modifications to the maps.
	As we noted during the passage of the Bill, the Countryside Agency has a difficult job to identify precisely where the land concerned begins and ends. It may be, therefore, that modification will be necessary during the process. That is the nature of the process. It is difficult to give too tight a definition.
	Access to the maps will be available. However, the provision of free maps is a different matter and one to which we did not commit ourselves during the passage of the Bill. That was never the case previously.

Faith Schools

Lord Dormand of Easington: asked Her Majesty's Government:
	What consultations are taking place on the proposal to increase the number of faith schools.

Baroness Ashton of Upholland: My Lords, the Green Paper, Schools: Building on Success, and the White Paper, Schools: Achieving Success, set out our policy on faith schools and were the subject of wide-scale consultation. Ministers continue to hold meetings with interested parties and listen to views on the implementation of the White Paper proposals and related matters. In addition, any proposed new maintained school, including any faith school, must be the subject of local consultation.

Lord Dormand of Easington: My Lords, is my noble friend aware of how little enthusiasm there is outside the Churches for the huge increase in the number of faith schools? Despite what the Government have repeatedly said, is it not evident that such schools can be divisive? We need go no further than Northern Ireland to see that.
	My noble friend will be aware that the issue of higher standards in faith schools is often discussed. Does she agree with the findings of the recent independent Civitas report which states that there is an enormous and unacceptable variation in standards in both Church schools and local authority schools?

Baroness Ashton of Upholland: My Lords, it is important to be clear that, under school organisation committees, faith schools will be subject to the same rules as other schools. Therefore, they would come into being only where there was clear backing from local parents and the local community. That is a fundamental and important part of the policy.
	I do not see hundreds of new schools coming into being, but it is important that we look clearly and sensitively at issues connected with the introduction of faith schools where parents and local communities want to see them.
	As regards standards, there are differing views. The information which I have seen shows clear signs that some faith schools have been able to work effectively with pupils to their benefit. In education, we are recognising that schools should have a clear and distinct ethos and that schools which are able to find new and interesting ways of working with their pupils are successful.

Lord Quirk: My Lords, does the Minister agree that one aspect which is so admirable in faith-based schools is their culture of hard work and discipline? Therefore, would it not be more widely beneficial to the country at large if, instead of encouraging the setting up of more faith-based schools, there were the encouragement of the spread of that culture throughout the school system?

Baroness Ashton of Upholland: My Lords, many schools have a culture of hard work and discipline, in the best sense of that word, for their pupils. In terms of culture, the introduction of the citizenship agenda into the curriculum is very important.
	Like good schools of all characters, good faith schools have long taught the value of inclusion, tolerance and the ability and need to work alongside people from all walks of life and to recognise the contribution which every individual pupil should and must make to our society. We believe that making citizenship a compulsory part of the curriculum in secondary schools from next September will be a valuable and important tool in that process.

The Lord Bishop of Gloucester: My Lords, is the Minister aware that the policy of the Church of England is that, while being clearly and distinctively Christian, our Church schools should be inclusive and serve the whole community in all its diversity? Is she further aware that a large number of diocesan boards of education, including my own in Gloucester, are in discussion with their partner local education authorities about increasing the number of Church secondary schools in particular?

Baroness Ashton of Upholland: My Lords, I am not aware of those specific discussions but I am aware of the role of the Synod and the Church of England in discussing the issues with my right honourable friend the Secretary of State for Education and Skills. It is important that Church schools consider very carefully their role within communities. In many cases, such schools have provided for a diverse range of pupils to the great satisfaction of all.

Baroness Walmsley: My Lords, does the Minister agree—

Baroness Carnegy of Lour: My Lords, may I—

Lord Williams of Mostyn: My Lords, the noble Baroness, Lady Walmsley, on the Liberal Democrat Benches rose first.

Baroness Walmsley: My Lords, does the Minister agree that every state school in receipt of state funding should serve the whole community in which it is located and not discriminate as regards access in respect of any faith or no faith at all? Furthermore, as regards this matter does the Minister agree with her right honourable friend the Prime Minister or her right honourable friend the Home Secretary, because they do not appear to agree with each other?

Baroness Ashton of Upholland: My Lords, I am receiving great advice on the question from my noble friend behind me. However, I agree with my right honourable friend the Secretary of State for Education and Skills, to whom I am responsible, that it is very important to ensure that schools recognise the contribution they make to a community. We have no plans to introduce admission quotas to schools but we want to encourage all schools to ensure that their intake reflects the local communities in all their diversities.

State Pension Credit Bill [HL]

Baroness Hollis of Heigham: My Lords, I beg to move that this Bill be now read a second time.
	I am delighted to have the opportunity to debate the principles on which the pension credit will be based. Peers who spoke on the uprating Statement welcomed the most important elements while, understandably at this stage, expressing caution as regards other aspects of the policy.
	For many pensioners who need it, the pension credit will provide not only more money, but a fairer system which will treat pensioners with the decency they deserve. I was glad that the noble Earl, Lord Russell, was able to say that this would be the answer to his prayers—I am not sure whether that is exactly the right word, given the noble Earl's convictions—because it will abolish the upper capital limit that at present denies some pensioners any help. I look forward to debating the areas of concern over the coming weeks and convincing noble Lords that the pension credit is a soundly based and well constructed social policy.
	The pension credit forms the major part of the Bill, but first perhaps I may touch briefly on Clause 18 dealing with the position of widowers. This forms the final instalment of the work we have undertaken to establish bereavement benefits that treat widowers and widows equally. As a result of an oversight in the drafting of the Welfare Reform and Pensions Act 1999, if a widower is receiving a pension from his late wife's contracted out pension scheme, there is no power to make a contracted-out deduction. That means that currently he receives a pension as though his late wife had not earned a contracted-out pension, when in fact she did. Clause 18 removes the double provision and restores the position that the House intended. I regret the oversight.
	Returning to the pension credit, I was grateful for the comments of the noble Baroness, Lady Greengross, after the uprating Statement. In a few sentences she encapsulated the main considerations that were in our minds. First, it is necessary to concentrate on helping the poorest pensioners. Secondly, we must see that those who have saved modest amounts for their retirement are rewarded for their thrift and effort, not penalised. Thirdly, we must tackle the obstacles that put people off taking their pension entitlement.
	There is a high degree of consensus in the House about the importance of tackling pensioner poverty. There is also agreement that we must ensure that future pensioners receive a decent income in retirement. Perhaps there is less consensus on how to achieve that, but I am sure that over the coming weeks we shall debate the issue.
	The yellow booklet that we published at the time of the First Reading of the Bill—The Pension Credit—the Government's Proposals—sets out the Government's pension strategy and, in particular, the reasons why we are introducing the pension credit. Since that provides the essential background and helps to explain why we are spending £2 billion in this way, I shall summarise the Government's pensions strategy and cover the important role of the pension credit in achieving our objectives.
	The 1998 Green Paper, Partnership in Pensions, set out a new framework for reforming both state and private pensions. The aim was to ensure that everyone could enjoy a decent income in retirement. Encouraging saving lies at the heart of this strategy. At the time we said that the pension system, both state and private, was failing to provide enough support for today's pensioners as well as failing to provide security in retirement for tomorrow's pensioners.
	In particular, too many of those who could afford to save were not doing so or were not saving enough. Roughly 40 per cent of all employees and workers were not making any voluntary provision for their retirement. Thus they were heading for poverty in retirement.
	The gap between better off and poor pensioners was growing. On average, pensioner incomes have been increasing faster than the incomes of those in work, but too many were left behind. Some 2 million over 60 year-olds were living at or below inadequate income support rates. The incomes of the richest fifth had risen by 80 per cent, while the incomes of the poorest rose by only 30 per cent.
	For those who could not afford to save, the state provision through SERPS was inadequate because the previous administration halved its value. SERPS did not provide enough support for people on low earnings or for people with broken work records due to caring for children or through disability. Of course, SERPS was always fatally flawed in that it gave the least help to those who needed that help the most.
	People also lacked confidence in the pension system following the Maxwell affair and the scandal of pensions mis-selling. The foundation of our reforms was and remains the principle that those who can afford to save have a responsibility to do so. In return, the Government should support those who cannot afford to save.
	The House will know what steps we have taken to improve the situation through the minimum income guarantee (MIG), winter fuel payments and other measures. As a result, around 2 million of the least worst off pensioners are better off, while the poorest pensioners are £800 per year better off.
	For those who can afford to save, we have improved the options available with the launch of stakeholder pensions in April. For those who cannot afford to save, we shall implement the state second pension from April of next year. As that scheme matures it will provide dramatically better provision for 18 million people on low earnings or who are unable to work because they undertake caring roles or are themselves disabled.
	Where does the pension credit fit in with our proposals for a state second pension and for stakeholders? The pension credit is essential to the overall coherence of the pension system. It will form the third piece of legislation and finally complete the jigsaw. It will provide the mechanism for ensuring that we can tackle poverty among today's pensioners without undermining the incentive for future pensioners to save for their own retirement. The principle is that those who can afford to save should do so, but also that the Government should support those who cannot afford it.
	But that principle presents us with a difficult structural puzzle. The yellow booklet highlighted the inevitable tension between the present arrangements for lifting today's pensioners out of poverty while also ensuring that today's workers have a clear incentive to save. We must lift the poorest pensioners out of poverty by increasing their income, but at the same time we must restore the incentive for people to lift themselves. How those two apparently conflicting pressures are balanced is the question which the pension credit seeks to address.
	The minimum income guarantee is not ungenerous and thus forms an element of the structural difficulty. That is because by 2003 it will lift pensioners from the retirement pension level of around £77 per week to a basic income of £100 per week. However, having ensured that all pensioners receive a decent basic income, we then have to deal with the problem that it is therefore not worth saving for a pension that would not lift the pensioner clear of MIG. To achieve that, a pension of at least £100 per month is needed.
	The situation that we inherited means that at the moment it is not worth it for people to save towards a modest occupational pension of perhaps £100 per month, or if they have a bigger pension, for their spouse to inherit it because they would be no better off than if they were in receipt of MIG. We believe that the pension credit will provide an elegant solution that targets substantial sums on helping the least well off and tapers that help for pensioners further up the scale of income distribution. So we shall tackle pensioner poverty in a precise way but we shall also ease the stark disincentive to save that has been inherent in any relatively generous safety net arrangement that has been put in place until now.
	The pension credit will resolve the structural puzzle by ensuring that those who save even modest amounts—by saving in a second pension or by putting money aside in a building society account or an ISA—will gain from having done so. At the moment, too many people do not gain.
	The pension credit will build on the other long-term reforms that we have already made by ensuring that we reward the thrift of those who have worked hard all their lives, but who feel let down because they are often no better off than people who have saved nothing.
	If not today, then at a later date, I am sure that I will be told that this will increase means testing. Certainly, many more pensioners—single pensioners living on incomes of up to around £7,000 per year and couples with incomes of up to around £10,000 per year will receive extra pension income. However, to say that the pension credit will be means tested implies that we will treat pensioners as though they were under the dreaded family means test of the 1930s, or that we will perpetuate the post-war discretionary scheme under which the National Assistance Board intruded into every element of a pensioner's financial affairs—looking week by week at every penny they had and monitoring every change, for example, by examining the lustre vase on the mantelpiece. That simply will not be the case. As will become clear, we intend to make a marked cultural shift in the way in which pensioners are treated. I suggest to the House with all due respect that we shall do a disservice to pensioners and their willingness to take up their entitlement if we continue to use the language that serves to stigmatise that which is their right.
	For example, from age 65 we will set awards for long periods, normally five years at a time, as opposed to the weekly assessment that lies behind the principle of income support. That will further reduce the intrusion that pensioners rightly complain of and which is an important contributor to the stigma they feel. We shall ask them to report only major changes in their lives such as, for example, the death of a spouse. They will of course be able to ask for their pension credit to be increased at any time should their other sources of income reduce.
	There is another element to the Government's strategy which is also relevant, although it is not a part of the Bill. We must do more to ensure that the service we give to pensioners and to people below pension age who are providing for their retirement focuses on what they want and need from the Government. Research—plenty has been undertaken—has helped to tell us what pensioners dislike about the ways in which traditionally they have been treated by the old Department for Social Security. In many cases that reaction has gone beyond "dislike" and has resulted in pensioners not taking up their entitlement. When that happens, they risk and endure poverty.
	Research report 100, Overcoming barriers, older people and income support, published in 1999, gives some clear evidence. Attitudes are important. In the past, too many pensioners felt that there was a stigma attached to claiming the old income support. The processes of making a claim, reporting changes in income and so forth put people off. The research showed that the processes people have to go through must be made more dignified. It also showed that the pension service must reinforce the message that pensioners are entitled to this help. We need others in society to make it clear that they believe that this entitlement is legitimate. We must make the information freely available, simplify forms, integrate the process, and back it up with a quality pension service.
	The service that we offer makes a huge difference to pensioners' decisions about applying for MIG. We have already improved access to pensioners' entitlements with the telephone service and the claim form, which has been reduced in length from 40 pages to 10. There is much more to do before we can say that the service is excellent, or even yet good enough. But that is our ambition—one which I am sure is shared by the whole House.
	Over time, we shall integrate our processes so that, at the point of retirement when people are invited to claim their basic state pension, we shall be able to use that opportunity to establish their entitlement to pension credit. They will then enjoy that for five years. As noble Lords will know, the entitlement even to state retirement pension is not automatically a simple one, particularly if people have less than complete pension records. We shall be able to do, so to speak, a waterfront of their income at the time at which they claim retirement pension and then give them a secure income for the next five years.
	We are also developing the capacity to write to all 11 million pensioners periodically to ensure that they are kept up to date with changes to pensions and to provide them with information about their entitlement. That is important, because the income of many pensioners declines as they get older. Even those who start above the pension ceiling may find that at some stage they become entitled to a savings credit, particularly if one goes up related to earnings whereas their own pension is related only to prices. We want to make sure that they receive the income as soon as they are entitled to it.
	During this debate, not only shall I be told that pension credit is a form of means testing—although I have done my best to address that issue; I shall also be told, with perhaps a little more justification, that pension credit is complicated. Many noble Lords who will contribute to the debate will understand the detail that must go into a pension scheme. But, at its core, pension credit is structurally simple.
	First, there is a floor below which a pensioner's income should not fall. That is the guarantee level. A single pensioner will be able to rely on having at least £100 a week to live on, using illustrative rates, and a couple £154 a week. It is simple arithmetic. The pension service will top up their retirement pension, whether it is complete or incomplete, to £100 a week as their basic guarantee.
	Secondly, through pension credit we shall reward those over 65 who have made some provision for their retirement above the level of the basic state pension. This is the savings credit. So the guarantee element of the credit takes the level up to £100—the MIG figure—and the savings element is the wrap-around of the modest occupational pension. We shall give them 60 pence in the pound up to a maximum of about £13.80 for a single pensioner or about £18.60 for a couple—again, using illustrative rates. That savings credit will take the thrifty above the floor.
	Let us take the example of a pensioner with a modest occupational pension of £100 a month. It might be an elderly widow who is perhaps 80 and who is receiving only half of her husband's pension. At this moment in time, that elderly widow with an occupational pension of £100 a month might just as well not have the extra amount at all. She gains nothing from it; it does not take her above what she would receive if her husband had never invested in an occupational pension. It takes her up to under the MIG level. But with pension credit that same elderly women will receive an additional £60 per month (60p in the pound) on top. That is the reward element. For such people, the point of saving for a pension, however, modest it may be, will become clear for the first time. This is fairly simple arithmetic and I hope that the concept of the pension credit is clear. Of course, the pensioner does not have to do the calculation. The skill is in helping pensioners to know that there is an entitlement for them to apply for.
	I suspect that I shall be accused on a third count: I shall be told that the pension credit discriminates against women. Again, I challenge that statement. It does not. Women are the main gainers from the introduction of pension credit. More than half of the recipients will be single women. By comparison, only one-sixth will be single men. In many ways, women will do very well from the pension credit, particularly because they live longer than men and, over time, inflation may erode the value of any second pension or savings that they may have. Pension credit will also be valuable for widows who inherit only half of their late husband's second pension. It is a valuable way of narrowing the inequality that persists, and will persist, until women's pensions catch up with those of men.
	However, there is a problem that we have had to tackle, and it is right to share it with the House. The pension system does not yet treat men and women equally. In this instance women are the beneficiaries of discrimination but that does not make it legally acceptable.
	State pension age will be equalised at 65. However, that could not be done at a stroke: it was necessary to move to this over time, so that people could build it into their financial expectations. Pension credit must cope with that transitional inequality, while itself treating men and women equally. I ask your Lordships to think about how we were to cope with transitional inequality, knowing that the goal was the equal treatment of men and women at the end of the process, and treating them equally at every point towards that end, while dealing with inequality as it currently stands in terms of retirement age.
	Noble Lords will have noted that, at the start, the guarantee element—which takes income up to £100 a week—will be paid to both men and women from age 60. So for the poorest pensioners we are equalising for both men and women at 60. But this will move to age 65 between 2010 and 2020 in step with the basic state pension.
	In the mean time, men and women aged 60 and over will all benefit from the fairer capital rules, which have been welcomed, from the streamlined pension service, and from the simplification of the rules, which I am sure we shall debate thoroughly in Committee.
	However, the unequal treatment men and women receive in relation to the basic state pension persists in the mean time. This means that there is no way of giving the savings credit—the sums over £100 a week—to men and women under 65 on equal terms, short of reducing men's state pension age to 60, in advance of raising it again in a few years' time for everyone to 65. We cannot do it; we are stuck. Therefore, what we are doing is equalising the guarantee element at 60 for men and women alike and equalising the reward element for men and women alike at 65. That is why we are doing it in this way. That said, I repeat that women are by far the largest beneficiaries of pension credit, but above all it is the older and poorer women who will benefit, who are most in need.
	Noble Lords will have noted the commitment to increase the guarantee credit in line with average earnings for the rest of this Parliament. This and rising take-up will increase the cost of pension credit. The cost of the savings credit will rise too. We have projected forward as far as 2050. This shows that expenditure on state pensions will remain largely unchanged as a proportion of GDP. Therefore, we have concluded that pension credit is and will remain affordable and sustainable.
	I am sure that I shall also be told in this debate—and I expect nothing less from my noble friend Lady Castle—that it would be better to increase the basic state pension in line with average earnings. I disagree profoundly. That would not lift the poorest out of poverty; all that would happen would be that an amount would be deducted from their minimum income guarantee sums; and it would go to many in this House—possibly in due course myself—which would be unreasonable. It would do nothing to help in terms of poverty. It would do nothing to tackle inequality—because the differentials among pensioners would remain the same if all received the same. Furthermore, it would not be financially sustainable. By 2030 the cost of earnings linking the state retirement pension would be £29 billion, more than twice the cost of the changes that we are introducing with pension credit; and most of the money would not go to those who most need it.
	Pension credit is a radical departure. It builds on all that we have done to tackle pensioner poverty by raising the level of income pensioners can expect as a minimum. From next year, the Government will be spending £6 billion a year extra on pensioners above the 1997 level, and, of this, £2.5 billion will go to the poorest third. In weekly terms the youngest poorer pensioners on the MIG will, by April, be £23 a week better off. Couples will be £33 a week better off. Pension credit builds on this by adding a further £2 billion to reform the old capital rules, to give pensioners the reward for saving and to protect these gains in housing benefit. So even those pensioners who do not gain from pension credit but receive housing benefit will see the same increase in applicable rates. So they will gain too. Pensioners who qualify will, on average, gain £400 a year.
	We have also, as the noble Earl, Lord Russell, was kind enough to notice, tackled the long-standing criticism about the way in which income from capital is taken into account. It is important to emphasise that the proposition in the Bill was a product of consultation. It was heavily influenced by organisations such as Age Concern, the FSA and others. The reward for savings, or "savings credit", as it is described in the Bill, is for those with a modest occupational pension that otherwise would not lift them clear by very far of MIG. Pensioners have been asking us for this for decades. It will ensure that those who put something aside for their retirement will be better off for having done so. It is fair and it promotes saving.
	Pension credit represents a huge cultural change. We want to put behind us everything that led pensioners to associate income support with charity, poverty and means testing. The decision to set the income assessment for five years at a time is part of that, but we shall debate many other measures in Committee. I welcome your Lordships' suggestions as to how we can further strip the residual stigma out of targeting to ensure that pensioners enjoy that which is their right. I commend the Bill to the House.
	Moved, That the Bill be now read a second time.—(Baroness Hollis of Heigham.)

Lord Higgins: My Lords, I am sure that the House is grateful to the noble Baroness for her usual expert explanation of the Bill and for the various points that she has made. I thank her, too, for the briefing that she has arranged for those who wished to study the detail ahead of the debate.
	I begin by declaring an interest as chairman of an occupational pension scheme. The noble Baroness has anticipated some of the arguments that she expects me to advance. I am grateful for that by way of commercial. She even included one that I had not even thought of, or at least not yet.
	It is a slightly strange title for the Bill—State Pension Credit Bill. One half of it is not a credit at all, but MIG under another name; and the other half has nothing to do with the state because it allows people to keep a little more of their hard-earned savings. No doubt we can discuss that issue later, or when we go into Committee on the Motion that the Title be postponed.
	One of my arguments which the noble Baroness was right to anticipate was that of complexity and the related problem of take-up. The House will know that Help the Aged has estimated that only 1.7 million pensioners take up MIG, although 2.5 million are entitled to it. That is a serious matter about which all of us should be concerned. Part of the complexity arises because of the constant changes in terminology. We seem to be moving from the now well-known minimum income guarantee to something that in many respects is a part of the pensions credit under a different title.
	The issue of complexity needs to be seen in the context of the Government's overall system of social benefits. I suggested when we debated the uprating Statement that we were reaching the stage whereby probably no one in the country understood the system, except perhaps the noble Baroness. I pointed out that since 1999 there had been five new tax credits for families, three of which were then scrapped and two more added. When I raised the issue last time, I thought that if the noble Baroness could enumerate them, that might be a sign that someone in the country understood the system. She did not respond then—perhaps she will on another occasion.
	At all events, the points about take up and complexity are extremely important. We discussed earlier the minimum income guarantee form. I hope that the noble Baroness can make the form available to the House, perhaps before Committee stage, so that we can see it with regard to the pension credit provisions. I realise that the Government want to deal with the problem by introducing the pension service in place of existing institutions. None the less the complexity of such forms is a matter of concern. It is argued that under this system, people will do most of the form filling by telephoning the pension service, which will complete the form and send it back to the applicant for approval. That is likely to be an expensive process. My 33 years' experience of Friday evenings spent interviewing pensioners suggests that it will be a difficult system to operate. We shall have to see how it works, but it would be helpful to see the form.
	Another matter that causes concern is the fact that much of the Bill will be implemented by statutory instrument. It is sensible in pensions legislation to implement by statutory instrument those parts of the Bill that will be varied in the future. But it seems that many of the proposals that will be dealt with by statutory instrument are permanent, so I believe that they should be in the Bill itself. Again it would be helpful if the noble Baroness could let us have drafts of the various statutory instruments that will no doubt be immensely complicated.
	Some other aspects of the Bill are causing concern. Surprisingly paragraph 2 of Schedule 1 refers to "national insurance numbers", which the noble Baroness seems to have overlooked. We know the deficiency of those. Perhaps that is one of the detailed issues that we shall be considering.
	Having said that, of course, we welcome the increase in money for pensioners. It would be foolish not to do so, but we have considerable doubts about some of the other aspects of the Bill. The change in capital limits is welcome, as is the abolition of the weekly means test, and so on. We are not saying that the Bill is entirely bad. Extra money for pensioners is obviously a good thing and there are other aspects that we welcome.
	However, its scope is comparatively limited. The people who will be helped by the pension credit provisions fall within a narrow range. An article in the Sunday Times of 2nd December reported a number of cases of people on modest incomes who would not gain from the proposals. We are concerned that as people go up the income scale the marginal rate of tax, or withdrawal of benefit, will be as high as 40 per cent. When we discussed that matter previously I said that I was concerned that there would be even higher rates of withdrawal for people on housing and council tax benefits. I understand from the Minister that that will not be the case. It is clear that many people will suffer withdrawal rates of 40 per cent, which is the top rate of income tax, but will the Minister confirm that no one will suffer withdrawal rates of more than 40 per cent?
	Some of the people involved in this measure will be those who are compelled to draw their annuities at age 75. If they are on low rates of annuity, which many are as a result of the fall in annuity rates, they will benefit from the pension credit element in the Bill. The issue of drawing annuities at 75 is important. There has been a great deal of publicity, and recently commercial firms have made proposals that would appear to overcome the difficulty involved in having to draw an annuity at 75. I do not know whether the noble Baroness can say anything about that at this stage, but I understand that discussions have taken place between the Treasury and her department.
	The noble Baroness is right to say that the question of means testing, which she prefers to call targeting, is important. The basis of the Government's programme on pensions has been to increase means testing time and again. Will she say what percentage of pensioners will now be subject to means testing; what percentage of the total population are subject to means testing; and give us the same figures in terms of absolute numbers? It seems that we have a system in which, to misquote Beveridge, we are being means tested from the cradle to the grave. That is certainly not what he envisaged. That is a problem. I realise that the noble Baroness is rightly seeking to remove the stigma involved. We are in favour of that, but the reality is that we are increasingly building an effectively means tested pensions community that is growing ever more into a dependency culture.
	Savings is another important issue. Will the Bill encourage people to save? The Government's system has created a series of different classes. Those who are below the minimum income guarantee level will get nothing if they have any savings. Those on low incomes will not get very much. People affected by the pension credit will certainly gain and those above that level will be taxed.
	The Institute for Fiscal Studies takes the view that the growth of MIG in line with earnings will unambiguously discourage savings and believes that the conclusion is ambiguous on the pension credit aspect of the payment. The IFS does not believe that the two parts of the Bill, taken together, will increase savings.
	I have a specific question for the Minister relating to the income that is taken into account in the course of the complicated savings calculation. I am not clear about the position of a pensioner in the system with a very low income. They might be entitled to the pension credit if they have savings, but if they do not have any savings and do a little part-time work—helping in a supermarket or something of that kind—will that income in any way attract a credit? I am also not at all clear about the position of savings income from PEPs and ISAs. It is totally outside the tax system, but will it also be excluded from the calculations when assessing whether someone is entitled to a pension credit?
	I am also concerned about the position of the part pensioner—someone who does not get a full national insurance pension because their contribution record is deficient or for whatever other reason. The issue has been raised by groups as diverse as the National Federation of Post Office and BT Pensioners and the Association of British Insurers. The ABI puts the case clearly. It says:
	"Under current proposals, less than full entitlement to the BSP"—
	the basic state pension—
	"will mean that the first part of a pensioner's personal savings will be used to bring them up to the level of the BSP and will not attract the additional saving credit. For example, if a pensioner has an incomplete contribution history and receives a BSP of only £67, but has £10 from a personal pension, they will receive the guaranteed income ... but no credit for their savings".
	That is unfair. When I made my maiden speech in the House of Commons, a very long time ago, I was concerned with the people who were left out of the national insurance scheme when it was introduced. I eventually persuaded the then incoming Government, as the first action that they took, to pay to non-pensioners that part of the pension that was not covered by contributions. Alas, those affected are all long since dead. A similar situation arises in this case. It is not right to have the situation that I have just described if the part pensioner is not getting that part of the national insurance contribution that is not covered by contributions. I hope that I have got that the right way round. I hope that we can give some consideration to that point in Committee.
	A number of outside bodies have estimated the cost of the Bill. The Chancellor has said that the pension credit will cost £970 million in 2003-04, rising to just over £2 billion in 2004-05. However, we have to look at the cost of the proposals over the long term, when people come to retire in 10, 20 or 30 years. Other estimates suggest that the cost over such a period could be very large—around £10 billion a year in current prices. Given the experience of SERPS, we have to consider whether the overall costs of the Bill are financially sustainable in the long run.
	My final point relates to the overall policy on pensions as far as the private sector is concerned. The Government have rightly paid tribute to the role of occupational pensions in our system of private provision, but there are real problems with the run-down of surpluses because of the state of the stock market, the Chancellor's actions on advance corporation tax, a change in the basis of valuation by the actuarial profession and a change in accounting standards under FRS 17 by the accountancy profession. We are much better placed than any other country in Europe, but all those issues are seriously affecting the bedrock of our system. Some of the people in the occupational system with small pensions will gain from the Bill. That is welcome. However, it is time that the Government paid attention to some of the problems affecting the basis of the pension of many people in the occupational side. They are likely to be adversely affected if there is an increasing move away from final salary schemes towards defined contribution schemes.
	Overall, the Bill should be welcomed. Its aim is to address a serious problem. However, there are a number of aspects, particularly on means testing—despite what the noble Baroness says—that require careful scrutiny. When scrutinising previous legislation, such as the Social Security Fraud Act 2001, we made great progress, with the co-operation of the noble Baroness. I hope that we can improve the Bill before it goes to the Commons.

Baroness Barker: My Lords, I begin, as always, by declaring an interest. I am an employee of Age Concern England. In doing so, I must make it clear that, while the work of my colleagues in Age Concern will inform my comments, as it informs other Members of your Lordships' House, it will not determine the views that I express on behalf of my party.
	I am something of a neophyte in pensions debates in your Lordships' House. I was most grateful to the Minister when, a couple of weeks ago, she sought to reassure me by saying that I should not worry because this is really just a technical Bill. Having spent the past two weeks reading copious material on the subject, I am beginning to understand the full horror of her statement. I now know that when the Department for Work and Pensions describes something as "just technical", it is a bit like a character in a Harry Potter book describing quidditch as "just a game".
	As we begin our scrutiny of the many proposals in this short Bill, it may be useful to remember the Government's stated aims for their programme of reform of tax-benefit integration and to assess the proposals on that basis. The Government's stated principles for its programme, set out in the consultation document, are tackling poverty, promoting incentives to work and save, maximising take-up, targeting support on those who need it most, improving customer services and increasing efficiency. Those factors should form the basis of any analysis of the Bill—as should the question of the extent to which the proposals fit with the reality of older people's lives.
	In short, there are elements within the Bill, such as the abolition of the hated capital limits and the end to weekly assessment which will be very welcome. Other elements, such as the extension of means testing—despite the Minister's comment, there will still be means testing—and the end of the age-related addition will not be welcome, especially when three quarters of the recipients of minimum income guarantee (MIG) are over age 75. So it is our task, as the noble Lord, Lord Higgins, has just said, to make the overall package more worthwhile and workable.
	It should also be borne in mind that 15 years ago, the value of the basic state pension and of what was then called supplementary benefit was roughly the same. Anyone who had savings on top of the basic state pension was generally better off. However, as it became apparent that the standard of living "guaranteed" by supplementary benefit was very poor, successive governments put money into means-tested support. As a result, a huge gap has opened up between the basic state pension and the guaranteed level of the means test. While that has been good to a certain extent in overcoming poverty, it has been bad news for savings incentives. It is that perverse incentive which this "savings credit" seeks to rectify. I imagine that that part of the pensions credit will be welcomed by many pensioners, when they understand the proposals. However, any joy will be tempered with the realisation that for those on less than the full basic state pension there will be no such reward under the level of £77.50.
	As the Minister hinted, it is already apparent that pension credit is fiendishly complex. It seeks to combine three separate objectives—a minimum income for the poorest pensioners; a reward for those who have saved and a future reward for tomorrow's pensioners to encourage saving; and to wrap those up together in one unhelpful title of pension credit. Complexity is a barrier to each of the Government's five objectives. Both the name and the combination of so many different elements seems unlikely to assist potential pension credit beneficiaries to know whether they are likely to be eligible—which does not bode well for take-up.
	Many briefings from different organisations have focused on the fact that the word "credit" is itself off-putting. That word implies loans and debts, which many pensioners avoid like the plague. Moreover, there is another element of potential confusion. The term "pension credit" was used in the Welfare Reform and Pensions Act 1999, to refer to a woman's entitlement to her spouse's pension were they to divorce. What research has been undertaken among older people in respect of that term and what evidence is there that it will either help or hinder take-up? If there has been no research, what plans are there to pilot the scheme and measure take-up? There is great merit in choosing titles that are descriptive. Have the Government therefore considered entitling these proposals, for example "pensions savings reward" which is a good description of their function?
	The extension of means testing, as the noble Baroness flagged-up, is likely to act as a disincentive to claim. Five million pensioners are likely to be brought within the scope of means testing. While for new claimants the retirement check will ensure that entitlement is established, identifying existing pensioners who are eligible may be very difficult. It is also questionable whether people will want to divulge their full circumstances when most will be eligible for much less than £13.80 extra per week.
	Another potential problem arises from the proposed five-year assessment. While most pensioners' circumstances remain fairly constant for long periods, that is not so for all. The Bill assumes that the Government will know what will happen to a person's pension in the interim—but will they? The Government will probably assume that any income from a private or occupational pension will rise with inflation. However, many people will have worked for several employers and will have retired with a number of small pensions. Each pension scheme may have a different provision. Some will rise with inflation; some will have limited price indexation; some may not rise at all if the fund's trustees so decide. How will the Government identify changes to income? Will there be any restriction on how often an individual or a couple can ask for a reassessment? If at the time of reassessment it is evident that a pensioner has been underpaid, will there be any facility for backdating entitlement?
	A major test of these proposals will be the extent to which they encourage people to save for their retirement. As the Bill currently stands, it is difficult to say whether it will have the desired effect or not, as so many different elements are unclear now and are subject to change by the current and future governments. The Institute of Actuaries has observed that the pension credit is really a benefit taper of 40p in the pound and will result in a smaller penalty being applied to some savings than is currently the case. For the group of people at whom the Bill is aimed, would it be preferable to put money into a pension or saving, knowing that it will, in effect, be taxed at 40 per cent, rather than simply spend it? It is difficult to see how people will be sufficiently well informed to be able to make such changes. For example, how will it be possible to predict if and when the £6,000 disregard level will be reviewed or uprated?
	The Minister said that the Bill is a building block in a range of Government proposals, and in that respect it is very necessary. In my professional life, I advise the boards of trustees of small organisations about their employment duties. Over the past two years, I have been trying to explain to people that it is ethically correct to provide a pension, even when for them to do so is difficult because they have limited funds. Boards are concerned that they may do their staff a disservice on retirement. That is a huge problem and one that many employers are only just beginning to recognise.
	The Bill does not make clear what, for the purposes of pension credit, will be deemed earnings. The abolition of the 16-hour rule will be welcome, as the noble Lord, Lord Higgins, has indicated. However, without a determination of earnings, it will be extraordinarily difficult for individuals to plan retirement income with any coherence. Similarly, the Pension Provision Group, in its commentary on the pension credit proposals in March 2001, pointed out the need to ensure that the measures do not provide an incentive to retire early. My party shares the Government's aim of enabling people to be economically active as long as possible. Does the scheme acknowledge the need not to penalise people who defer taking a state pension and therefore receive an increment when they finally do so?
	A significant flaw in the scheme is the restriction of the savings credit to women over 65. Women between 60 and 65 will not be eligible to receive the savings credit. It seems strange that while entitlements such as the winter fuel allowance and concessionary travel are being equalised at 60, savings credit will be withheld. The Minister may say that the scheme is based around the state pension for men, for which those age 60 to 64 do not qualify. However, men of that age can still claim MIG. If a fundamental principle of the Bill is to encourage savings, why penalise younger older women for doing just that?
	Another significant issue is the way that pension credit will relate to other benefits and charges—specifically housing benefit, as mentioned by the noble Lord, Lord Higgins. Can the Minister confirm that payment of pension credit will not lead to loss of income from either housing benefit or council tax benefit? The current taper for an individual receiving both benefits is 85%. For every extra £1 a week income, recipients only gain 15p. Pension credit will remove the 100 per cent income withdrawal rate that currently applies to MIG. Will the Minister confirm that persons who receive partial housing and council tax benefit could still face a withdrawal rate of 85 per cent or more?
	Another area of considerable concern is people who are either in residential care or who receive services in their own home for which they are charged. Any change in the general level of pensioner income may well have an effect on charging policies. I realise that, in an era of joined-up government, any such change would have to be the result of discussion between the Department for Work and Pensions and the Department of Health. Nevertheless, as they are issues of significant concern to many pensioners, I would be grateful to the Minister if she will consider the following questions.
	Are any changes planned to the charging systems used by the Department of Health in both domiciliary charges and care home charges to reflect the changes proposed for the pension credit and the Government's policy of rewarding those who have saved?
	If there are to be no capital limits for pension credit, how will those who are in care homes, or those who are charged the full rate for home care by their local authority—who often find that their capital is quickly run down—be informed when they should claim pension credit?
	How will those who are in care homes, or those who pay the full rate for their home care and are on pension credit, be informed when the pension credit should be increased due to their rapidly reducing capital?
	Similarly, it should perhaps be pointed out that the introduction of the pension credit will make the current system of hospital down-rating even more iniquitous. When the Government themselves acknowledge that pensioners' circumstances do not vary greatly over time and that most hospital stays are for less than six weeks, and given the disruption to other benefits such as housing benefit and council tax benefit, it seems unduly harsh and administratively expensive to withdraw elements of the pension credit when someone is in hospital, as currently happens with MIG. Does the Minister agree that, with major changes to the pension system in progress, it now makes sense to remove hospital down-rating?
	As I said, as this is a short Bill, many of the factors that will determine the scheme's efficacy are as yet unknown. Most detail of the administration will be known only when regulations are laid before the House. It seems from the Bill's current provisions that the Government have based much of the administration on their experience of the working families' tax credit. One of the difficulties in attempting to administer such a complex system is the diversity of the older population. Any system that applies to half the pensioner population—from those who are English speaking and fully computer literate to those who are not literate in any language or have dementia—will have to be backed up by world-class administration.
	The Institute for Public Policy Research has described an "advice vacuum" for pensioners and the need to use a range of media in order to reach people. Will the Minister therefore say what opportunities, in addition to a free telephone number, older people will have for face-to-face advice? What messages will be deployed by the Government as they seek to explain this complex system?
	Noble Lords will no doubt be aware that the MIG campaign was fronted by the wonderful Dame Thora Hird. In the past few days, I have found myself wondering how the Government will advertise the pension credit, and I think that the Minister may have given me the answer when she talked about simple arithmetic. I suspect that, given its audience profile, the law of this land is that every English-speaking pensioner must watch "Countdown", and that they must videotape it if they go out. They are also required to play against the contestants and mark themselves. The advertising campaign for pension credit could therefore feature Carol Vorderman doing the numbers bit, and contestants could say, "I'll have one from the basic state pension, one from my occupational pension, one from housing benefit, one from council tax benefit, one from invalid care allowance and any two small numbers from the top, please." Pity those for whom the pension credit is an insoluble conundrum.
	This is a complex scheme that will be difficult and expensive to administer effectively. Although some of its elements are welcome, it contains significant drawbacks. It does nothing, for example, to safeguard the basic state pension, which is and should remain the cornerstone of any scheme for retirement income that meets the Government's five criteria. However, I give the Bill a guarded welcome from these Benches. I hope that, in our deliberations, it will be possible to improve its many provisions for the benefit of older people.

Baroness Andrews: My Lords, this is for me another maiden voyage: it is the first time that I have had the courage to speak on social security. I think that it is also the last time that I shall want to follow a "neophyte" speaker. This may be a technical Bill, but I hope that I will be excused if I stick to the principles and to some of the impacts—as there will be—on elderly people themselves. I must say that, in previous debates, I have been put off by the sheer brilliance of Front-Benchers, which has been counter-balanced by the lustre of Back-Benchers. I can see that the debates on this Bill will be no different.
	I have been moved to speak because I believe that the Bill tackles one of the persistent failures in social security: the why-save syndrome. We used to hear a lot in the 1970s and 1980s about the why-work syndrome, and that was a very powerful concept, but I do not think that as much attention has been paid over the years to the why-save syndrome. The Bill will make a significant difference to a group of people who have been persistently neglected—those who have saved a little but have lost out for many years for the very reason of their thrift.
	Many years ago, in the 1970s, when I began my career as a social policy researcher, we were all very concerned by the failure of the Beveridge report to anticipate the interaction of work and benefits. That failure created so many gaps and inequalities in the system. The crucial problem of the 1970s was to increase pensioners' overall income in relation to general incomes. We were also concerned particularly with women. The link with earnings and the introduction of SERPS were designed to bring a new concept of collectivity and equality into pensions provision. Those moves were welcomed by consensus.
	The 1980s saw a reversal of that concept, with the language of the apocalypse, the projection of unaffordable and unfunded pensions, the dismantling of SERPS, and the break between pensions and earnings. The priority was to be personal risk and individual action. That created some very good and some bad outcomes, which your Lordships have had to deal with over the years.
	One feature that has remained constant over the past two decades is the growing gap between rich and poor pensioners and the persistent failure to address the issue of pensioners with small savings. Those increasing inequalities have been thrown into sharp relief by the continued failure to reward and support those same pensioners. In recent years, that failure has been exacerbated by the very low returns on investments and savings which have made many pensioners despair entirely about the purpose of saving.
	I therefore believe that the Bill is not only overdue but is extremely timely. For those who are just above benefit level—the almost and nearly poor—small lifetime savings have been a positive barrier, not a boost to income. Pensioners with small savings—an additional £20 a week pension earned after years of working in a shop, an office or the public services—have been outlawed from receiving MIG because of their savings, without the consolation of being able to fall back on larger savings. Moreover, as MIG is linked to earnings, the gap between the basic state pension and MIG will grow larger. Pensioners who find it hard to manage are precisely those who find it so hard to save for anything extra either for themselves or for their grandchildren.
	I know that my mother will not mind if I pray her in aid in an attempt to illustrate an example; indeed, the pension credit system could have been modelled on her circumstances. The system will make a big difference to her. Indeed, given her savings, it will assure her of an additional income of £6.40 weekly. That sum will pay her newspaper bill and her milk bill, which are not insignificant. Therefore, in the great scheme of things, £2 billion boils down to £6.40 and the payment of bills. If my mother had sufficient savings to receive the maximum credit of £13.40, it could pay her winter gas bill or home insurance bill. As the Minister said, two-thirds of those who will benefit most from the credit are women, and half of those will be among the very poorest.
	Therefore, and following the noble Baroness, Lady Barker, my first question to the Minister is on the position of elderly people in care homes. May I be assured that my mother would be at no greater disadvantage should her circumstances change and she went into a care home? Will the assessment remain the same? If it does not, will there be adequate, accessible and understandable ways of explaining the change?
	I believe that the Bill will resolve some longstanding issues of principle, not least the concept of a guaranteed income for the poorest pensioners. One of the crucial elements for pensioners is that they know what they are likely to receive in retirement; predictability as well as reliability are so important. The other day, a pensioner was quoted in The Times as saying:
	"You feel much more secure when you know you are not going to get less than £100 a week. I am very pleased that the Pension Credit will help people like me who are not on income support but who have a little money coming in from pension schemes that they paid for during their working lives."
	I also believe that the Bill resolves some longstanding issues of process. I am delighted with the abolition of the capital limits. Those have led over the years to increasing distress as people find themselves on the wrong end of that sharp cliff of disadvantage with incomprehensible tapers that presume an income which very few have been able to realise, or have known that they have realised. I also welcome the disregard of £6,000, especially in the light of the fact that 85 per cent of those who will receive the pension credit have savings below £6,000.
	Critics will obviously judge the Bill on the extension of means testing. Language is a problem. But the reality is that both Age Concern and Help the Aged have welcomed the reward for savings. They have criticisms but they have welcomed the fact that the Bill will,
	"clearly address some areas of pensioner poverty today".
	That is something on which we can build as the Bill passes through its stages.
	I am also pleased that the Government have shown evidence of having listened to so many people in the consultative process. The evidence of that is in the Bill before us. However, as every speaker in the debate so far has pointed out, there are serious questions about complexity and incomprehensibility. The jobs and money editor of the Guardian recently described tax credits as
	"a thing of pure mystery".
	It was depressing to read that because if he has difficulty, I am not quite sure where that leaves the rest of us, let alone the majority of pensioners.
	Some fears have been dealt with by the abolition of the weekly assessment. The fact that the pension credit will be calculated once every five years pending any major change of circumstance is clearly a huge improvement. My second question for the Minister is the following. Can she clarify the full extent of what is meant by major changes, particularly those which are bound to turn up in regulations?
	Clearly, a great deal will depend on the quality of the new pension service. The simplification of the MIG form is an excellent start but we should not have to make the case for clearer and simpler language, especially for elderly and confused people for whom every form that comes through the letterbox is a threat. If they are like my mother, they put forms straight behind the clock. They do not read them and the next thing they know another, different coloured form arrives which is even more terrifying. We must address this matter at a personal level.
	I make the plea that this is an opportunity to make the new pension service a personal service. This may be a counsel of perfection but I believe that every elderly person ought to have his or her own welfare rights case worker in attendance on any benefits negotiation in which they are involved. Too often they realise that their circumstances are deemed to have changed only when they receive a form, a demand or, in the worst case, a summons for repayment of benefit overpayment, or a visit from someone they do not know who speaks a language they do not understand. My third question for the Minister has been mentioned on all sides of the House this afternoon. What steps will the Government take to make sure that the pension credit does not fall prey to all the difficulties we have experienced with other pension arrangements to date?
	Noble Lords will be aware that Sue Ward is a considerable expert on pensions. She argued in a recent paper for the Industrial Society that the least we should be able to expect is that pension arrangements will be fair, clear, secure and efficient. In terms of clarity, it would be even more welcome if the Minister were to announce to the House one day that we were to have a system like that of the Danes. Their pension system is as complicated as ours, but they have a single Internet site on which any individual can obtain figures for his or her entire pension entitlement, state benefits and all others without infringing rights to privacy. How very different that is from protracted negotiations with the benefits centre. I speak with a note of weariness having just embarked on such toil.
	I say in conclusion that many questions will be asked at later stages of the Bill. There will be questions about designated limits, detailed processes, exclusions, the variable impact and on certain aspects of principles. But those working with and for pensioners have welcomed the Bill for what it intends to do—which is to provide greater security and greater fairness for pensioners. I too welcome it on those grounds.

Baroness Greengross: My Lords, I start by congratulating the Minister and the Opposition Front Bench on their speeches, which have demonstrated a notable clarity and expertise. I particularly congratulate my former colleague, the noble Baroness, Lady Barker, on her address today. We worked together on these issues over many years.
	Some of the issues addressed in the Bill are ones which I remember working on over the years and discussing with the noble Lord, Lord Fowler, on many occasions and with the noble Lord, Lord Higgins. They are longstanding issues which have been of great concern. I refer to the whole issue of income in later life. One of the most frequent grievances I heard from older people was that they were not rewarded for thrift and felt no better off, and sometimes very much worse off, if they had saved than if they had not.
	Although we are talking primarily about people just above the poverty line, that comprises millions of older people who believe that thrift is a good thing—that is a cornerstone of their belief—and are disillusioned by their experiences. We have waited a long time for action from all governments. However, if I may use a pun, it is to the credit of the Minister that, along with the Secretary of State and other Ministers, she has been open in wanting to tackle a difficult problem and aims to do so by means of the Bill. As she expected, I, too, believe that it is extremely complicated. I hope that we can simplify it during its passage through the House.
	The limits have now changed. For many years the lower capital limit for extra help was only £3,000. In some cases that included the value of a home. In 1997 we even had the situation of one council ignoring the will of Parliament and forcing some older people to spend their assets down to £1,000—enough to pay for a funeral—which was rather depressing. A fine balance has to be drawn in deciding when retirement savings should be used, for example, to pay for long-term care. However, to be left with £3,000 after a lifetime seemed extremely harsh to me.
	If sufficient help cannot be given to all pensioners equally through the state pension, primarily for reasons of cost, I agree—as I have said previously—that targeting available extra government resources on the poorest is sensible, first, by increasing markedly the income support levels, as has already happened, and now, secondly, by rewarding thrift. That is one of the reasons I welcomed separating income support for older people—which became the minimum income guarantee in 1998—from income support for others. However, I believe that the minimum income guarantee is rather badly named.
	I welcome the principle of giving extra help to older people on top of their state pension entitlement, either to bring them up to a minimum income as of right, as MIG does, or to credit them with extra money to take account of the efforts they have made to save. However, that is the easy part. Turning all this into practice is more difficult. That is what we are now trying to do in considering the Bill.
	I also welcome the principle of tax credits, which form part of another Bill which your Lordships will soon consider once it has left the other place. I should have liked the Bill we are discussing to be better incorporated with the changes being made to the Inland Revenue and Contributions Agency in combining tax and benefits. Through tax credits, even for non-taxpayers such as the vast majority of pensioners, the extra money could be seen as a form of "tax back". I understand that that is the intention eventually, but why not introduce it now?
	In practice, I have some reservations about the way in which the state pension credit will be implemented. I hope that the Minister will clarify some points which have largely already been mentioned. I hope that we can tease them out in Committee and at later stages.
	I agree with the noble Baroness, Lady Barker, that the word "credit" implies something for many people which needs to be considered carefully. It is already a little confusing to have the department's proposals called the pension credit and this Bill entitled the State Pension Credit Bill. That needs to be sorted out. If the word "state" is not incorporated then many people might believe that they are eligible regardless of their income and savings, which could create more confusion. So the word "state" is important.
	I saw comment in the media criticising these proposals because they apply only to those with a private pension income of less than £3,000 and savings of less than £37,000. But I believe that the media are missing the point because the policy is targeted at those with modest savings and income in retirement. Yet the same media complain that it will cost too much and bring too many people into the means test. In my view that is trying to have it both ways. I do not believe that is fair.
	However, I would welcome reassurance from the noble Baroness on the long-term costing. I do so with the thought in mind that if it costs more than projected, the money is at least going to older people. Under the terms of the Bill it will not go to the wealthiest, which is the good side of these proposals. It is not just government spending which is going to disappear into a black hole, it will provide additional income to older people who are just above the current benefit levels.
	On the extension of means testing, we have to move away from the idea that it is a stigmatising process. It has been. That is because of the way in which the whole system has developed over the years. Will those eligible for the state pension credit claim it? If they do not, we may be creating a new group of older people who will fail to take up their rights. Only if the system is fully automated will it be successful. It is a pity that our experiments so far with fully automated systems, like the Danish one, have not worked so far in this country. But if they did it would do an enormous amount to solve the problem that the Government are aiming to tackle.
	The old, bureaucratic form-filling processes are so difficult for old people, who are sometimes not very well educated. Even the most educated among us have difficulty with forms. If one is weary and not very well, then it is an extremely off-putting experience. Anything that we can do to make the system simple will help: the five-yearly re-assessment will be a great help. I welcome that. However, we in this House should tease out how the new system of assessing income and capital can be made simpler than the discredited system which is now going to be replaced.
	The explanatory notes, on page 5, refer to the pension service which will be set up from April next year and which will administer this credit. Can the Minister update the House on the development of the new pension service? It is important. It is a long-term change and it could be seen as the silver lining to the cloud of last year's inherited SERPS scandal. The way in which the old departments dealt with older people was not very good. The system did not work very well. I should like to be reassured that the new service will be able to deliver, explain and administer the state pension credit well. I, like many others, am concerned at how complicated it is. I have tried to understand how it will operate. I congratulate the Minister on her explanations. It is very important that the staff at the Department for Work and Pensions are able to deal with the scheme so that everyone can understand.
	There is still some confusion as regards the age at which the credit will apply. The Minister tried to enlighten us on that. She spoke of the transitional period and the difficulty of applying the scheme equally to men and women, and I appreciate that. It is a very important issue. The difficulty is the age of entitlement to income support and so forth rising to 65 years of age from 2010 for both men and women. It applied earlier to the Travel Concessions (Eligibility) Act. It also applies to this measure. That Act had written into it eligibility for half-price local bus fares rising from the new age of 60 to 65 from 2010. Will the eligibility age for other benefits for older people also rise to the age of 65 for benefits such as the free eye test and the winter fuel allowance in 2010 and onwards? How will the Government inform people, especially women aged under 52, of these changes? We need clarification on those points.
	The Bill is also unclear on earnings disregard. Rising longevity is likely to change work patterns and certainly should do so. It should become the norm that older people can continue to do paid work beyond the now very young age of 60 or 65. Many of us in this House welcome those changes! I hope that that will not be at the expense of losing all the top-up state pension and benefits. I can foresee that many older people would be able to continue to work part-time if they also continued to receive their pension entitlement in full, perhaps with a higher threshold. We need much more flexibility. I very much welcome the undertaking by the Minister, Barbara Roche, to look at these issues. I hope that all these matters can be brought together.
	Further clarification is needed on how the state pension credit will interact with other existing benefits such as housing and council tax benefits and so forth. I believe that the noble Baroness, Lady Barker, also mentioned other charges such as domiciliary care charges, carer's benefits and other state benefits. We shall need to look in depth at all these issues.
	With those reservations, I welcome the Bill. It will benefit that large group of older people who have saved, but who have been unable to save enough to be comfortable in retirement. It will also go some way towards ceasing to regard people who defer their earnings and who expect to receive them in pension form, from being considered as quite different from the younger population who receive their income from their current employment. That is why I like the basic idea that underlines this Bill. It brings the whole population together regardless of age. I welcome it.

Baroness Castle of Blackburn: Perhaps I should begin by conveying to the Minister the apologies of my colleague, Lady Turner, for her inability to be present in this debate today. We all know how passionately interested she is in all these questions and her participation in our debates has been remarkable. But at this moment she is undergoing a long overdue operation to her knee at the Royal Free Hospital. I am sure that the whole House will join me in sending her our best wishes for a speedy and complete recovery.

Noble Lords: Hear! Hear!

Baroness Castle of Blackburn: She has asked me to convey her determination to be present during our Committee debates. I am sure that that reassurance will be very welcome to the Minister.
	No one would have guessed, on listening to the Minister galloping her indistinct way through her brief, that we were today taking part in a debate on one of the crucial turning points in the development of pensions policy in this country. It is all very low key, is it not? Everybody is keeping it down. The Government have very cunningly timed this debate to take place two days before we rise for the Christmas Recess, when all our minds, including mine, are on whether we have wrapped all our presents, sent all our Christmas cards and yet decorated the Christmas tree.
	But I want to point out to this House what is happening. We are going to double the number of pensioners on means-tested benefit as a result of this legislation. That may not worry the Minister but it worries a number of us who do not believe that this country wants to live in the means-testing ethic to which the Government's policy is leading us.
	Apart from anything else, how can they be so certain about the take-up? Dash it all, we have just heard in this debate that the Government's take-up campaign for MIG, which involved getting all kinds of celebrities almost on their knees to beg pensioners to take up the minimum income guarantee to which they were entitled, had only led, despite the expenditure of considerable money, to an increase in successful applications of 120,000. You are now talking about 5 million pensioners. Do you really think that you are going to get 5 million pensioners taking up the pensioners' credit? I do not. I think that we shall be asking questions in this place in the coming years which will reveal that the take-up is as laggardly as it has been over the minimum income campaign. As more than one pensioners' body has pointed out, the elderly do not like the stigma of having to reveal their last penny in order to qualify for what they feel should be theirs as of right. I am afraid that we shall find that they will not accept the Government's easy solution of, "Oh well, that is all right. We will just tell them that it is their right".
	I was a Labour MP in the House of Commons during the 1960s, when we begged pensioners to take up the national assistance or supplementary benefit. We renamed it almost as many times as this Government have renamed their benefits. First, it was income support; then it became the minimum income guarantee; now it becomes the pensioners' credit. It does not matter how often you change the name or how often you tell proud people that this is not charity but their right, they will say, "Then why am I expected to fill in all these forms if it is my right?"
	I acknowledge that the Government, as a result of the pressure from behind them in the years of debate on this matter, have reduced the application form for minimum income guarantee from 40 pages to 10 pages. I think that I could just about manage that, but it is hardly an "open sesame" to something that people feel is theirs as of right.
	I must say that the Government do listen and sometimes act on what they hear, which is why some of us keep up our pressure in this House and refuse to accept defeat. The pensioners' credit is due to the efforts of people like Lady Turner and the rest of those who have joined in revealing that means testing penalises thrift, penalises people who have saved and put aside something for a second pension and penalises people who have not blown it all.
	I remember in one of our earlier debates—I think on the pensions and welfare Bill; there have been so many and they all have different names—reading out a letter that I had received from a pensioner. She said that what she objected to was that having scraped and saved all her life—having got a little house, a little second pension and a few savings in the bank—her friend and neighbour, who had never saved a penny, received more pension than she did. I think that the House was impressed by the sincerity of that letter. She said, "I do not begrudge her it, but why should I be penalised for having been so careful?"
	I think that that sort of clarion call penetrated even the Calvinistic heart of the Chancellor of the Exchequer because he suddenly said, "Oh, this Government have made a wonderful gesture—they are going to reward saving". That conversion was welcomed. Mind you, there were no credits given for the conversion to anyone else but themselves.
	But then, you see, having accepted that we were right to say that means testing penalises thrift, hard earnings and the economic needs of this country for saving and investment, what do they do? What solution do they provide? More means testing. So we have another great paraphernalia for 5 million more.
	Incidentally, I will tell you what I find interesting— there is no statement in any of the Government's documents as to what would be the administrative cost of extending means testing to 5 million pensioners. Because it costs, you know, just as private pensions cost. One pound in every £4 that you save goes on administrative costs, while, as the Office of Fair Trading pointed out in its report in 1996, the state pension, SERPS, was the most economical scheme to administer, the most comprehensive in its area and totally portable—something that could not be said about any of the other schemes and systems. But, no, that was awful.
	I must tell the Minister that I am not disheartened by her rejection of my policies—not a bit. The more we see the effect of her alternative, the more my position is strengthened. I have a few instances here. It is very interesting to hear the voices that are now coming out. Age Concern has quite rightly stated in its briefing on this Bill that it believes that the best pension system is a nationally-administered state insurance scheme. Quite right. Good old Age Concern! Help the Aged has also said that it thinks the Government's present policy is misguided and believes that it would be better to revert to what we as a movement had so effectively before. The Institute of Public Policy Research—which I believe is a fairly Blairite kind of body—issued a report only recently saying that the Government's whole pension policy is unravelling and that the Government should go back to the drawing-board and see what they can do. I urge the House to take seriously what is happening. The future security of millions of our people is at stake. It said that the policy is unravelling because there is no certainty that the stakeholder pension will hit its target or that it will reach the people who need it. As for the state second pension, it remains dangerously obscure.
	I received a lovely boost from an article in the Observer of 9th December, just a couple of Sundays ago. It cheered me up no end. It said:
	"It would be fairer and more cost-effective to adopt a nationally run social insurance system, with top-ups paid by the better-off, to co-exist with private saving".
	It concluded:
	"exactly like the scheme suggested by Barbara Castle 30 years ago".
	I do not always feel like boasting about my longevity but it is nice to be remembered after 30 years. I say only this: I did not only suggest the scheme—Parliament adopted it and the country welcomed it, as did the pensions industry. "At last", it said, "we have got a real public/private partnership that is realistic. It will work and leave out no one".
	If the Observer is prepared to look back 30 years, why should not this House? Why should we not have the guts to face up to this patchwork quilt? They say, "Oh yes, means testing is uneconomic, so let's slap on some more means testing". I ask you. If I were still a Minister, I should be ashamed to put that forward. I would get my lads and special advisers around the table and we would say, "What can we do? It has got to be affordable. The sky is not the limit. We all know that we are up against public expenditure limits. What is the best that we can do?" In other words, I call on the Government to listen to the public policy research people and Help the Aged, and to say, "Our policy is unravelling. We will go back to the drawing-board".

Lord Fowler: My Lords, it is a great pleasure to follow the noble Baroness, Lady Castle of Blackburn. The first speech that I ever made on pensions was on her Bill in 1975. Two weeks earlier, I had been appointed to the shadow Cabinet of my noble friend Lady Thatcher, much to my surprise and the great annoyance of my rivals. For the next two weeks, I immersed myself in pensions. I took advice from virtually everyone, including the noble Baroness, Lady Andrews, who made an excellent speech this afternoon. I turned up for the debate in the House of Commons with great trepidation, thinking that it would be one of the great debates of our time. I found that when the Bill was called, the House emptied; 10 people remained on one side and 10 on the other—that is unlike what happened in your Lordships' House a few hours ago. After a while, the noble Baroness, Lady Castle, disappeared as well, to hold a press conference on why we should say "no" to the European Union.
	My career has followed that of the noble Baroness in every way. I have gone into every department that she worked in, including those responsible for social services, transport and employment. In those areas, I do not think that we have agreed on anything at all. I pay very sincere tribute—I believe that I speak for the whole House—to a politician who has always fought with great courage for what she believes in.
	I turn to the Bill. Not wanting to change the political habits of a lifetime, I fear that I have to say that I do not agree with the noble Baroness. In making policy on pensions and social security, there are two broad choices that any Minister and any government can make. One can give general benefits to everyone irrespective of need. The disadvantage of that is that one obviously gives benefits to many people who by most—virtually all—definitions do not need them. It is vastly expensive and, even with the clawback of taxation, it remains so. Enormous sums are involved.
	Alternatively, one can try to target benefits to those who need them. I agree with the noble Baroness, Lady Andrews, who said that we should get away from the emotiveness involved in describing that process as means testing. In 1985, I carried out a social security review under the Thatcher government. I argued unambiguously for more targeting of benefits. The aim was to produce help for those who needed it and not to put a counterproductive burden on the economy. So we kept, for example, child benefit as a general benefit but we introduced family credit for low-income working families who needed extra support in bringing up children. That policy was accepted and followed by the Major government. It is the obvious basis of today's child tax credit system.
	I have to say that at the time and in subsequent speeches I have argued that the natural complement to that policy is the pension credit. That gives an additional pension to those who, through no fault of their own, have not been able to build up an adequate occupational or personal scheme. That may have been because there was no occupational scheme for them to build up or because of the indefensible rules of some of the occupational schemes that used to exist. I remember my father's own experience—or my mother's, as it happened. My father died aged 62, having worked for 30 years for the same company and built up a pension. However, because he had not reached the age of 65, no widow's pension came; all that was returned were the contributions that he had made. Fortunately, as a Minister, I was able to help change that indefensible position.
	To be frank, I should have preferred it if my government had introduced the pension credit. I have no intention of jumping overboard just because that proposal comes from the current Government. It is long overdue, and my hope is that it will provide support for some of the most deserving people in this country.
	I am of course aware of the counter-arguments. One of the chief counter-arguments is that the system is over-complex. If it can be simplified, all to the good. If it can be paid through the tax system, I am entirely in favour. My party used to be committed to tax credits, and I still believe that there is much in that system.
	I also believe that a great deal of nonsense is talked about simplifying social security. When I carried out my social security review, we came across a very simple benefit called the death grant. The condition that triggered the benefit could not have been clearer. One did not need to think deeply about how the benefit was secured. There was no means test—the benefit went to the widow of a millionaire or the widow of someone on low income and in poverty. It was introduced for the very best of motives—to take away the real concern among families that they would be unable to afford the cost of a funeral. A benefit was introduced with impeccable intentions but in practice it turned out to be disastrously inadequate.
	By the time that I reached the Department for Social Services, the grant amounted to £30. It was irrelevant to most people and it was entirely inadequate to those who needed it. In terms of spending, it cost £12 million to administer an annual expenditure of £17 million. That is the position I inherited. No government would increase the benefit but neither would they abolish it because it was regarded as politically untouchable. We did abolish it but, at the same time, we targeted spending on those who needed help. At the time, the policy was opposed by the party opposite, but I see no great rush to return to that old system.
	Therefore, I do not go along with the idea that simplicity is all. There is complexity in social security just as there is in the tax system, and for very much the same reason. One is dealing with millions of different people with different incomes, different needs and different positions and conditions. But that is in no way an argument for saying that one should not do as much as possible to clarify the position. We should obviously do that. But I remain the supporter of a system which gives child benefit as a general benefit and, in addition, family credit as a targeted benefit. I certainly support the idea of the basic state pension and of additional, targeted help to those who need it.
	I shall retain my detailed criticisms of the Bill for the Committee stage. I believe that the very title of the State Pension Credit Bill is extraordinary nonsense. If anything, it is the taxpayers' pension credit Bill. But we all know why the Government are doing this—it is so they can say that they have replaced the noble Baroness's state earnings related pension scheme with the state pension credit scheme. I do not believe that the mere fact that the one has next to nothing to do with the other has deterred them.
	Needless to say, I believe that there are far more profound and fundamental criticisms concerning the Government's policies. My aim was to create a position in which everyone had a second pension of their own—either an occupational or a personal pension—in order to do away progressively with the need for pension credits. Frankly, I do not believe that the Government's current policy will achieve that end. That is my basic criticism in this Second Reading debate.
	Currently, we are seeing companies abandon final salary schemes. There is no question of that. Mostly we are seeing people being discouraged, not encouraged, to save for their retirement. I do not say for a moment that that is all the Government's fault. Clearly it is not. Demographic trends and people living much longer than previously obviously add to the uncertainties of the cost of a final salary scheme. There is no question about that. Nor do new accounting rules, mentioned by my noble friend Lord Higgins, that put perceived actuarial deficits into company accounts have a helpful effect on the continuation of those schemes.
	But the Government seem to be fundamentally at fault in at least two respects. First, I believe that the £5 billion a year pension tax introduced by the Chancellor in the 1997 Budget has had a very damaging effect. Five billion pounds a year is being taken out of pension funds, and that affects everyone who saves for their retirement. In many ways I believe that it is amazing that the Government, with so little perceived outrage at the proposal, have got away with an attack which has affected so many people in this country.
	I fear that the reason is that pensions and pensions policy are perceived by the public as a rather complex area. Sometimes pension holders do not even know the details of the schemes to which they belong. I remember that we carried out a survey on the state earnings related pension scheme when we considered changing the system. We found that virtually half the people who were in that scheme did not know that they were members of it. That is a fairly dramatic example of the ignorance that I fear exists in relation to pensions policy. If one then begins to talk about changes in advanced corporation tax, there is a great danger that the public will switch off altogether. The fact is that the full impact of what is taking place will not be felt now; it will be felt in the future when pensioners come to draw the pension. That is the real tragedy of what is taking place.
	The second reason that I blame the Government is the impact of the rule which states that, if one has a personal pension, one must put one's savings into an annuity at the age of 75. Annuity rates have fallen and I believe that we must take account of that. The position is not the same as it was 10 or 20 years ago. People see that clearly for themselves, and many no longer regard the advantages of saving in a pension scheme as they once did. Again, the consequences will be felt not immediately but, I believe, by people who do not make proper provision for their retirement. So far as that is concerned, we shall again see a delayed impact.
	I know that the Government have now said that they will re-examine the position concerning annuities at the age of 75. Personally, I do not expect a great deal from such a review for the following reason. At the TUC conference in October, the Minister for Pensions, Ian McCartney, dismissed the case as applying only to the rich. I believe that that is complete nonsense. I do not consider that it applies only to the rich; it applies to a whole range of middle-income people in this country. I believe that he would be well advised to consider that case with sympathy and with the aim of trying to encourage people to make more and more provision for their retirement. There should be no doubt or debate about that.
	Therefore, I fear that many people could face an impoverished retirement unless we change policy. That is the case directly because of the Government's policies. Furthermore, I believe that there will be two nations in retirement. One will be the public sector, including civil servants, Ministers and MPs like Mr McCartney, and former MPs and Ministers like myself. Incidentally, even now MPs are pressing for a further reduction in their accrual rate. They will have their final salary scheme. I guarantee that that will be preserved, and the bill will be picked up by the state and local government; in other words, by the taxpayer.
	The other nation will be the private sector and, in particular, middle-income groups which are losing out directly as a result of the Government's policies. I believe that we must face the issue and the problem that exists there.
	Therefore, I say to the noble Baroness that I support the pension credit and I congratulate the Government on having introduced it. However, at the same time I deplore the way in which the Government are eroding the financial position of those in this country who save for retirement. We are not talking about rich people; we are talking about middle Britain and millions and millions of people who are trying to save for their retirement. At least the mis-selling of personal pensions could be put right, albeit in a cumbersome and lengthy process. But the £5 billion a year pension tax will not be put right. We all know that. The Government do not have the slightest intention of putting right that tax, and the people who will suffer will be tomorrow's pensioners.

Baroness Gibson of Market Rasen: My Lords, I do not know who decided on the speakers' list today but I have obviously drawn the short straw, speaking as I do after two such formidable experts in your Lordships' House as my noble friend Lady Castle and the noble Lord, Lord Fowler.
	In my short intervention I want to concentrate on only one aspect of the Bill—the pension service. I begin by explaining that I shall use the language of entitlements rather than delve into means-testing because it seems that the way that evaluation is being tackled in this Bill is different from the way that it has been tackled in the past.
	We have heard much about the complexities of the Bill. However, I want to welcome one proposal in it that should make life easier for pensioners; that is, the pension service. It is a system designed to be both simpler for all to understand and fairer in its implementation. It is on that subject that I wish to concentrate today.
	Like my noble friend Lady Andrews, as I read the Bill my thoughts turned to my mother. Without any doubt the current system is extremely complex. Currently my mother lives in a residential home in my home town of Market Rasen. The home is pleasant, well-run and caring. In that sense my mother is lucky, but on the downside she is 89, very frail and easily bewildered. Luckily for her I am able to assist in the running of her affairs. If I were not able to do that, I dread to think how she would have coped with the plethora of forms and questionnaires that she needed to fill in to gain the rightful payments towards her keep in the home.
	So that she could receive her entitlement I filled in the forms from different authorities, couched in less than helpful language and I spent hours on the telephone to different parts of the country. My mother could not have managed to do that. Six years ago, when she became unable to care for herself, she had to sell her only valuable possession—her bungalow—to pay for her upkeep in the home. Now the money that she received for the bungalow is running out and again I am dealing with the various authorities to sort out her affairs. Already the nightmare of being pushed from pillar to post has begun.
	My mother is only one of thousands of citizens all over the country whose anxieties reach breaking point if they have to deal with bewildering bureaucracy. Anything that can simplify the current unwieldy system must be welcomed. I agree with other noble Lords who have spoken that one area of simplification must be the forms that have to be filled in, of which I am sure the Minister is aware.
	The pension service should not only simplify matters, but it should also establish a system whereby pensioners can receive all their entitlement automatically. The first indication that the Government would introduce a new pensions organisation to deliver services and benefits to pensioners was in March 2000 and two years later it will begin to operate. As I understand it, the proposals are that pensioners will be contacted before they reach pension age to assess future income, to calculate the pension credits and to organise the basic state pension payments. After that first assessment, the pension credit will usually need to be assessed only every five years.
	The pension service will deal with all pensioners issues. It will provide one point of contact for pensioners and it will act as a gateway to other services. It will provide a local service, working in partnership with local authorities and other organisations such as the health service, social services and government departments. That is a simple and sensible way to progress. I wonder why it has taken successive governments so long to arrive at this point. If only the pension service had been in effect six years ago my life would have been easier.
	I welcome this part of the Bill and hope that it will prove successful when implemented. I hope that the Minister will be able to assure me that I have understood correctly the main proposals relating to the pension service and that my faith in it is justified.

Lord Henley: My Lords, I intend to speak fairly briefly. It is eight years since I last spoke on social security matters in this House. I believe on that occasion I was sitting where the Minister is sitting and she was opposite me. Since then things have changed a little. The department's name has changed. No longer is it the Department of Social Security, but the Department for Work and Pensions. I find it strange that work and pensions come into the department, but there is no mention of disability matters, income support and so on. Perhaps that is a point to be made on another occasion.
	Eight years ago the noble Baroness was already well experienced in social security matters. I believe she entered the House in 1990 and almost immediately became social security spokesman. She has continued to serve in opposition and in government, representing that brief. I believe that all noble Lords will agree that she knows as much about the subject as virtually anyone in the House. All noble Lords are grateful for her detailed explanation of the Bill and for dealing with so many of the problems that she said that my noble friend Lord Higgins and others would raise with her. For that we are eternally grateful. She also assured us that the Bill is not over-complex. No doubt that is a matter that can be explored in considerably greater detail in Committee.
	Although I know a certain amount about social security matters, my knowledge is fairly rusty. I want to make four brief points in a broadbrush manner. I hope that in Committee I shall be in a position to consider these matters in greater detail. My first point relates to evidence of the long-term thinking that is necessary in relation to all social security matters, especially pensions. When the Government first came to power in 1997 we were told that they would think the unthinkable in terms of pensions reform. We saw little of that unthinkable thinking. In the end, Frank Field, who was supposed to think the unthinkable, left the department and that appeared to be that. I have a sneaking suspicion that the Bill is a further tinkering at the edges and that it will impose ever-greater burdens on future taxpayers. We have to accept that in the end the taxpayer funds the pensions of the future, through national insurance or whatever.
	We have to consider the matter in the long term because pensions affect us all in the long term. Fairly major demographic changes are taking place. When pensions were first introduced at the beginning of the previous century, on average the retired lived for a relatively few number of years after retiring and taking up a pension. Thanks to improvements in medical science and in standards of living—no doubt due to the work of engineers and others—we are all living considerably longer and in many cases we are retiring considerably earlier.
	In my days in the Department of Social Security we spoke of there being three people of working age for every pensioner. We also said that by the time someone like myself faced retirement age—in the year 2018—that figure would have changed from three people of working age for every pensioner to two people. Pensions are a means of transferring wealth between the generations, and it seems to me that the burden on my children will be 50 per cent greater for the same degree of provision in 2018 than at the moment.
	Can the Minister confirm that those figures are still broadly correct? In the past eight years have they worsened or do we have a clearer view of what demographic changes we shall see in the coming 20 or 30 years? Is the population likely to stabilise? Will there be further demographic changes in terms of the proportion of different people of different ages? That will depend on how many children are born in the future. We know how many are born at the moment, so we can predict matters for a goodly number of years in the future. My first question relates to sustainability. What can the noble Baroness say about demographic changes that are likely to take place in the future and what will be the likely burdens?
	My second broadbrush point concerns the growth in occupational and private pension provision, which was touched on by my noble friend Lord Fowler. In this country we have, and always have had, immensely strong occupational pension provision. I seem to remember quoting the fact that the total value of United Kingdom pension funds was greater than the total value of all the pension funds in the rest of the European Community put together. That gives us a terrific advantage in that our pension provision can be partly state-provided and partly provided by means of occupational and private pensions. Is there still a growth in occupational pension provision? If not, why not? What will the Government do to encourage yet further growth?
	I am sure the noble Baroness will accept that not everyone wants standardised nationalised state pension provision. Everyone needs something different to cater for their own particular needs. Therefore, it is very important that we hear from the Government about provision beyond that provided by the state and that provided by the private sector.
	My third broadbrush point concerns the complexity of the new benefit and of the Bill. I am not quite like Sydney Smith who said:
	"I never read a book before reviewing it; it prejudices a man so".
	I took the trouble to glance through the Bill before coming to the House. I shall no doubt look at it in much greater detail in due course. The Bill certainly seems to be very complex, the benefit even more so.
	I accept the points made by my noble friend Lord Fowler, but, of necessity, most social security provisions are likely to be very complex indeed. I accept that there must be a tension between universal benefits, which, by definition, are expensive and fully targeted, but relatively cheap to administer—although my noble friend told us about the death grant which cost almost as much to administer as it paid out—and means-tested benefits which are better targeted but more complex, and then much more complicated and expensive to deliver. There is that further tension within means-tested benefits of those with a long taper and low rates of withdrawal but including ever increasing numbers of people within the benefits and those with a much shorter taper but where the beneficiary can find the marginal rates of deduction very high indeed. I certainly remember the noble Baroness quoting deduction rates of 90 per cent or possibly even higher.
	Having said that, we have over the years, and certainly when we were in government, seen a decline in the number of pensioners on means-tested benefits. Between 1979 and 1997 the number of pensioners on means-tested benefits fell from 57 per cent to 38 per cent. With the Bill, and as I understood the remarks of the noble Baroness, Lady Castle of Blackburn, we shall see a dramatically increased number of pensioners on means-tested benefits, even though the Minister seeks to argue that they are not means-tested benefits and we must not call them so. But I would certainly be interested to hear from her what she thinks will happen in terms of that decline from 57 per cent down to 38 per cent. How will that percentage increase over the years?
	My final point concerns the likely effect of the Bill on future pensioners. Any state provision must always be based on the premise that individuals must be encouraged to look after themselves and that it is no good introducing perverse incentives to save. I accept that that is what the measure attempts to do. I have considerable doubts. They were spelt out much more effectively by my noble friend Lord Higgins who quoted the Institute for Fiscal Studies. There will be perverse incentives and people will in many cases be discouraged from saving. There is no need to repeat what my noble friend said, but we must come back to that matter in Committee.
	I look forward to the Committee stage of the Bill. I am sure that we shall be able to go through what may necessarily be a complex measure in a great deal of detail.

Lord Hodgson of Astley Abbotts: My Lords, I start by declaring an interest as the chairman of trustees of an occupational pension scheme. It is a final salary scheme. I shall come back to that in a minute.
	I apologise to the Minister for not attending her briefing session the other day. If I cover some of the points that she wanted to then cover, I apologise now.
	On Monday, 10th December, just over a week ago, the noble Lord, Lord Renton, asked an Unstarred Question relating to the drafting of Acts of Parliament. The noble Lord sought to press for an effort to make Acts of Parliament comprehensible to the averagely intelligent and interested reader. Other noble Lords in that debate drew attention to the paperchase effect where, by following through a reference in a Bill to a provision in an earlier Act, one can find if that particular provision was itself a revision of yet an earlier statute. So one trawls through ever earlier pieces of legislation.
	This particular proposal before us today must be a prime candidate for the Renton treatment. It is not an easy read. Therefore, I, along with other noble Lords, fear endless confusion and misunderstanding as it begins to be rolled out to a wider public.
	Clearly, we want to ensure that all members of our society have some assured level of income in their old age. We want to do that and at the same time make it worthwhile for people to save.
	When I was a member of another place, there was probably no issue that angered my constituents in Walsall more than to find neighbours who had given no thought for the morrow and had spent all their money. However, they were able to accrue the same or better benefits than those who had foregone their spending to build up savings for their old age. The noble Baroness, Lady Castle, attributed this fury to means testing. I am not sure that she is right. I think that the fury was directed at the unfairness of it all, rather than at the means testing. But, never mind, whether she is right or I am right, I therefore understand the thrust behind the Bill.
	But, as my noble friend Lord Fowler has said, at least part of the problem that we are discussing and trying to address in the Bill has been caused by the Government. I referred earlier to my chairmanship of an occupational pension scheme, a final salary scheme. We have had to close it. From 1st December we shall no longer accept entrants to the scheme. They will have to take a group personal pension plan. We do that with regret because we should have liked to provide the opportunity for the people in this particular company to join the group scheme. But longevity, which is nothing to do with the Government, the burden of regulation, which is something to do with the Government, and the tax changes, which are all to do with the Government, have meant that we have had to move to a system of benefits which, while it offers flexibility, probably does not offer over time necessarily the same benefits as a group scheme would be able to.
	So, in my specific comments to the noble Baroness, I address the need for flexibility going forward into the future. We live in a changing era and in very rapidly changing circumstances. Therefore, I should like to think that we could have flexibility built in wherever possible.
	The first question that I ask is about qualifying income. The yellow booklet that the noble Baroness had prepared and circulated talks about putting money aside in a bank or building society or by saving in a second pension. I was concerned about the rather narrow nature of these examples. The Bill appears to give a wider definition of income from capital and income of any prescribed description. I want to ask the Minister whether that includes dividends from shares.
	My noble friend Lord Higgins referred to the important question of PEPs and ISAs, but many people have taken shares in their company when it has been denationalised or privatised. Not all of them are as sadly afflicted as Railtrack; some of them have quite substantial savings built up.
	In my capacity in the City, we have in many cases put ESOPs—employee share ownership plans—into companies, where people of quite limited salary aspirations and limited hours of work are able, over a lifetime, to build up quite substantial savings if the company for which they work is successful. What will be the position of these people under this particular legislation?
	The second point concerns the capital disregard. The paper again bravely states that we shall abolish the rule which excludes pensioners with £12,000 or more in savings. That is a brave statement. Am I right in thinking that what has been imposed in its place is a £17,000 limit for single pensioners and £25,000 for couples? A 4 per cent attribution to the maximum amount one can receive under the savings credit would give the amounts of £17,000 and £25,000 respectively. Perhaps the Minister will deal with that when she comes to wind up the debate.
	Will she also deal with the question of where the home fits into all that? I am a director of a building society in the West Midlands. It is a blue-collar society. We are talking about not highly but modestly priced homes: our average mortgage is for less than £35,000. Those are modestly priced homes in Telford and the urban West Midlands, often purchased cheaply under the right-to-buy legislation and owned by people who are not necessarily well paid but have scrimped and saved to purchase their homes.
	We are being approached by an increasing number of people who, in their old age, are looking to obtain a form of equity release—that is, to use their home to obtain capital to live on, interest free, that will be repaid at their death by the sale of the home. We must know where such people, who have an alternative form of savings, will fall under the savings credit.
	Finally, to pick up the question raised by the noble Baroness, Lady Barker, how often will the assessment of levels—the £6,000 level and the 60p in the pound credit—take place? I leave aside the question of why such people should be charged the top rate of income tax, but if the top rate of income tax were altered, would that provision also be changed? Will the assumed rate of 10 per cent be changed if inflation and other economic circumstances change? If we take the example given in the yellow booklet of the maximum savings of about £16,000, the imputed savings rate is about 6.25 per cent—a good deal higher than is now available on gilts or most government bonds.
	I understand and appreciate the objectives behind the Bill, but the detail and complexity will require considerable analysis in Committee.

Lord Lea of Crondall: My Lords, I rise to make a brief contribution in support of the main thrust of the Bill. I shall then follow those noble Lords who have taken the liberty of making some broader points about pensions strategy.
	We have heard a delicate balance of arguments, and ultimately we must all stand up to defend whatever compromise we finally arrive at—especially the overall costings, a point addressed by the noble Baroness, Lady Greengross. The theme of the debate—with the distinguished exception of the noble Baroness, Lady Castle of Blackburn—has been a growing consensus about the delicacy of the balance that we are designing, rather than any more basic disagreement about architectural faults of design.
	As my noble friend Lady Gibson of Market Rasen said, that balance extends to the question of the practicability of making the entitlements approach different, and perceived to be different, from a means-testing approach—with the emotiveness that has, understandably, always been associated with that. Nowadays, the debate should not be about the pension credit versus the uprating of the state pension. We certainly need both and are getting both—although there is an upside and a downside to both. The entitlements approach is strong and, as many noble Lords, including the noble Baroness, Lady Castle, have pointed out, the Government have undoubtedly been doing a formidable amount of listening. The pamphlet on the subject is user-friendly; even I could understand it. It is a much better document than we have been used to in this area. That gives us confidence that when the provision gets off the drawing board onto the streets, the public information campaign that must follow will be one that people can understand.
	My right honourable friend the Chancellor of the Exchequer may be going a little far when he implies that the process is just like filling out an income tax form, but that claim is not as outrageous as it would have been about the minimum income guarantee. There has been a growth in segmentation, or variability, of pensions arrangements in recent years and, as many noble Lords have said, that will increase apace in the next 10 to 20 years.
	The problem of penalising thrift is addressed quite well and the increased allowances for savings are an essential reform to remove the major objection to the current arrangements. If I may say so, if we do not like the capital limits, it is incumbent on us to say which limits we should prefer, with the relevant price tag attached to them.
	The leaflet on the pension service also makes the point that there is scope for people to use the telephone to talk through their application. That is an important point. The Trades Union Congress investigated the question of what people were looking for when it set up a helpline. The problem of complexity and how to get people comfortable when talking through what is inherently a complex situation was the main feature of that investigation. All our lives are complex in that sense.
	The point has been made that even for the poorest group of the population—the 2 million to 3 million concerned for the narrow purposes of the Bill—access to a private telephone is now almost universal, whether individually at home or through the warden in a residential home, and so on. In many debates we have heard stories about the financial insecurity of people—especially women—who have been caring for relatives throughout their lives. They will rely exclusively on the state pension and will find the procedure under the Bill far more acceptable and helpful than any previous procedure.
	Those are not just minor points and footnotes; they are central to the concerns of people in their real lives. While it may be premature to say that Whitehall has learnt how to be customer-friendly, the new pension service concept is certainly a step in that direction.
	The fact that the state pension will go up—even if the retail prices index does not—by 2.5 per cent is part of the two-legged approach that we must always bear in mind when saying that the pensioner credit will rise with earnings during this Parliament. If I may go slightly wide of the Bill, as have one or two other noble Lords, that begins to address the fact that there are serious strategy problems in the wider pensions field.
	Unfortunately, it is increasingly perilous for people to look at their future prospects when there are uncertainties about retirement age. The Bill must address a technical problem relating to equalisation, but everyone knows that there is a bigger debate out there. It was touched upon by the noble Lord, Lord Henley, when he referred to the ratio of 2:1, or whatever it is. We all know that the situation will be more serious if we live to be 95. The slogan "Don't retire until you're 95" may be a good one for this House. The noble Lord, Lord Henley, who is not in his place, might like to try that out for size. It will not be a widely popular method of solving people's problems as they perceive them because they may have thought they would be playing golf before they were 95 and perhaps now they will have to join a golf club for the over-95s.
	I did not hear many noble Lords who mentioned final salary schemes say what they would do to support them. It is a way in which employers can take money out of the employer/employee ratio; they can reduce what they contribute to their companies' pension funds. A typical employer will be contributing less to workers' pensions if we stop new entrants to the final salary schemes. There is increasing anxiety about that issue.
	Another increasing anxiety is understandable. If the large pension funds—those amounting to £500 billion—are to decline, what will happen to the chronic problems of short-termism, which have been analysed for many years, in the investment cycle in British industry? If the pension funds decline, will that not have effects on that cycle?
	I turn to the concerns which I want to address to the Minister. I am sure that they will not be new to her. The first relates to the IPPR. How far is the guarantee a long-term commitment, because the IPPR and other bodies are saying that it is not financially sustainable? I am sure that it is but we must ask ourselves how, from one Parliament to the next, we can work out the kind of guarantees that must be given for such an arrangement.
	Secondly, the front page of the interesting leaflet on the Bill produced by the department points out that pension inequality has grown partly because original income inequality has grown. That is the unmistakable conclusion to be drawn from the graphs on the front page of the leaflet. How far can pensions policy be capable of redressing the growth of inequality in incomes at work? That is the greatest problem we have seen in the growth of social inequity in the past 20 years. Whether we attribute it to globalisation, new technology or the attack on the trade unions is a matter of opinion, but there will be great difficulty in having greater equality in pensions if there is rampantly growing inequality in incomes at work. At the end of the 21st century, we do not want the historians to look back and say that the century rubbed out all the gains made in social equality in the 20th century.
	It is possible to use emotive language at both ends of the spectrum. Pension fund managers, Hermes, have called some American-style packages for the very wealthy tantamount to theft from the shareholders. It is warning that that is a contagion spreading to Britain. We must therefore recognise that there is a case for taking a pensions strategy as a whole. That is the context in which we must see this modest but important part of the jigsaw puzzle.
	In conclusion, the handling of savings—the poverty trap—will not go away but I believe that it is being handled in as intelligent a manner as can be envisaged. The Government have done a good job in putting the Bill together in the way that they have.

Baroness Fookes: My Lords, I never thought to express sympathy to a noble Baroness so well able to take care of herself as the Minister. However, I thought it unkind when earlier in the debate she was accused of galloping. Metaphorically there may be a gallop because she is seeking to ride two horses which have a natural tendency to run away from one another; namely, the immediate need to deal with those on very low incomes and the need not to deter others from saving in retirement.
	I am anxious about the costs of the proposals. The noble Baroness, Lady Castle, said that she could find no indication of the administration costs of the new scheme, which will greatly increase the number of pensioners who fall within it. I am concerned about the more general substantive costs. Figures were given to us for 2003 but I can find nothing which relates to a period further ahead.
	I understand the hope to be that the need for the various purposes of the Bill will lessen with time as more people are able to have second pensions. However, let us suppose that that does not occur. My noble friend Lord Fowler pointed to serious indications that the increase in occupational and personal pensions would not go according to plan. Therefore, we need to be provided with figures showing a best-case scenario and a worst-case scenario for a period further ahead than 2003. I should be interested if the noble Baroness could indicate the substantive costs as well as the administrative costs.
	I now turn to the terms of the Bill. Like other noble Lords, I am concerned about the title of the benefits which are to be given. I am even more concerned about access. However, I am most relieved that I am no longer a constituency MP holding Friday surgeries to which my noble friend Lord Higgins alluded. I would not want to try to explain in detail to bewildered pensioners what is involved for them.
	It would be helpful to see the draft form so that we could ascertain whether it was as simple and clear as we would wish. I would not expect to have that at Second Reading but I see no reason why we should not be given sight of it at later stages in the Bill. I hope that the Minister will be able to assure us that that can be done. A more detailed exposition of how the pensioners concerned will be targeted would also be extremely helpful.
	I want to make two other points which have not so far been raised in the debate. The first is something of a hobby-horse of mine. I am dismayed, although not surprised, to see in Clause 1 that the benefits we are discussing would not be extended to anyone living outside Great Britain. I know that I go on about the subject and that it is probably boring, but I have a real concern for British pensioners living outside the European Union who gain nothing from the pension upratings. The arrangement under the Bill will serve only to make the gap even wider. I suspect that all of us shall be receiving further complaints from pensioners' organisations overseas in New Zealand, Canada and Australia when this information reaches them, if it has not done so already.
	Secondly, there is an interesting clause covering polygamous marriages and how the benefits are to be distributed in those circumstances. However, we are not given any indication of what the principles or practice might be. It is to be left to regulations. I share the concern expressed by my noble friend Lord Higgins when he referred to regulations which deal with a matter that is permanent, as opposed to dealing with changes where fresh regulations need to be made. We have no idea how this will be interpreted. It would be helpful if the noble Baroness could give at least some indication of how this is to be worked out.
	The hour is late and I am aware that many noble Lords are looking towards the wind-up of the debate. I conclude by saying that I think that the Bill is a brave attempt to reconcile the irreconcilable. I hope that, in Committee and during the following stages, we might seek to make further improvements to the legislation.

Baroness Crawley: My Lords, it is a privilege to take part in a Second Reading debate which has attracted so many pensions experts, several of whom have spent their professional lives involved either in policy making or policy shaking for the benefit of older people.
	In welcoming the Bill, I should like to refer to some of the observations and concerns expressed in over 400 responses to the pensions credit consultation paper that was produced this time last year. Reactions to the proposals came from a wide variety of organisations, including Age Concern—which has been referred to several times during the debate—the Alliance for Finance, the Chartered Institute of Taxation, the Fawcett Society, Help the Aged, Scottish Widows, the Transport and General Workers Union, the National Pensioners' Convention, the Northampton Afro-Caribbean Elders Society, the National Board of Catholic Women and so many others that I could go on listing them, but I shall not do so.
	The vast majority of the responses that I have read expressed in general terms their welcome for the Bill, in particular as regards the issues of capital limits and the weekly assessment. In some cases, the responses went further in acknowledging the context of the Government's activity in favour of pensioners since 1997. In her opening remarks, my noble friend referred to the introduction of the minimum income guarantee to assist the poorest pensioners, the rise in the basic state pension, the recent winter fuel payments and so forth. The cumulative effect of those actions can be seen graphically in the chart set out in Annex B on page 16 of the yellow pension credit document from the Department for Work and Pensions to which my noble friend Lord Lea of Crondall referred. It is clear that the impact of government policy on the weekly income of pensioner households between 1997 and 2002 has resulted in a gain of £25 per week for those in decile 1 and a gain of £8 per week for those in decile 10, with an average gain of £18 per week. That includes the pension credit additions, after housing costs and excludes tax changes.
	The undoubted beneficial impact of government policy still leaves the unresolved and urgent issue of low pensioner income for a significant group of older people to whom reference has been made in the course of the debate. I refer to pensioners with incomplete pension entitlement. That will not be resolved immediately by the terms of the State Pension Credit Bill. We know that because the legislation has been directed at rewarding modest savings. However, the Bill will benefit over 5 million pensioners, 1 million from the guaranteed income and 4 million from the savings reward. Furthermore, while welcoming the Bill as a proper response to a social security system that penalises pensioners with modest occupational pensions or savings, many organisations said in response to the consultation that they were extremely anxious to ensure that the legislation would not bring with it even further complexity in regard to accessing benefits. They hope that lessons have been learnt by the Government after the initial problems with MIG and its take-up.
	That is where the new pension service, to which my noble friend Lady Gibson referred, should come in. The response paper from Katherine Rake at ESRC Sage Research Group helpfully set out a list of criteria against which to judge a well-functioning pension system. The list echoes to some extent the criteria set out by the noble Baroness, Lady Barker: first, adequacy; secondly, equity; thirdly, protecting incentives; fourthly, transparency; fifthly, stability; and sixthly, administrative efficiency. That list is useful not only to bear in mind as we progress through the Committee and Report stages of the Bill, but also to use as a set of benchmarks when judging the effectiveness of the proposed new pension service.
	I understand that the aim of the pension service, which is to commence next April, is to move progressively towards a system whereby pensioners may receive automatically all their entitlements. The calculations involved in assessing people's income will be the responsibility of the service rather than of the individual pensioner. Can I press my noble friend on the Front Bench to point out why she is confident that the new service will do better than the present situation, which still leaves so many pensioners confused about their entitlements? Discussions with my 80 year-old mother and her friends—whom she refers to as "elderly ladies" because they are in their late eighties and nineties—become lively when they touch on the subject of entitlements. Those ladies are clear about most aspects of their lives, but they find the issue of pension entitlements an extremely difficult hill to climb. Is the Minister quite confident that the new service will be able to meet the anxieties that have been expressed in the course of our debate?
	Several respondents to the consultation document raised the issue of women pensioners. Again, other noble Lords have also referred to this matter. As the present Chair of the Women's National Commission, I am particularly exercised about improving the retirement income of women. The issue is one of the greater scandals of modern society. So many women see their incomes shrivel as they grow older. By the time they reach retirement age their financial reward, as it were, often bears no relation to the amount of caring, teaching, effort and hard work that they have put into the lives of their families. In many ways the Government have tried to address those problems, which has proved to be a challenging task.
	I know that my noble friend on the Front Bench is extremely sympathetic to the plight of the poorest older women in this country. I press her to use her great intellectual capacity within the corridors of power to ensure that that group of people—who by the very nature of the Bill, cannot be covered by its provisions—are not forgotten.
	Finally, the Bill will be welcomed by many women. The proportion of single women who are eligible for pension credit amounts to 53 per cent of the pensioner population, compared with a figure for male pensioners of 16 per cent. The Government have estimated that around half of all pensioners will gain from pension credit and that two-thirds of those entitled to pension credit will be women. Half of those women will be aged 75 or over. So the Bill will be greatly welcomed by many women who have struggled to save and who have a small occupational pension entitlement. It goes some way in challenging the scandal of poverty to which I have referred.
	Some organisations, such as the National Pensioners' Convention, reflected the on-going debate—which we have heard from the noble Baroness, Lady Castle—about the universality of pension entitlement. In response to consultation especially, they referred to the Bill as part of a reversal of the post-war policy to reduce reliance on means testing.
	Like my noble friend Lord Lea, I do not agree with that analysis. The state pension is still the foundation of the pensions system and must be maintained at a level that is meaningful and not derisory in terms of the variety of economic circumstances in which today's pensioners find themselves, or the security in retirement of future pensioners.
	However, on top of the basic pension, it is crucial that government policy responds to the reality of older people's lives in Britain today. On average, pensioners' incomes are rising faster than those of any other broad group in the population, but these improvements are by no means shared equally within the pensioner population. Building on the basic state pension by targeting the most significant state help towards the poorest pensioners and at the same time encouraging those with savings is a modern, responsible and realistic way forward.
	The Bill follows on from the provision for a state second pension and the new stakeholder pension. I believe that it will be an acknowledgement of so many people's struggle to work hard and save hard during their working lifetime. For that reason, despite the problems that have been aired in the debate, I welcome the Bill.

Lord Addington: My Lords, after a debate of such quality, in which the Front Benches started off at a cracking pace, most of what I had intended to say has already been said. Noble Lords will forgive me, therefore, if I do not go over all the ground that has been covered. I shall attempt to restrict my remarks to a couple of points.
	I have two genuine questions. First, are the implications of this legislation roughly neutral for all those who are in receipt of disability-related benefit? I have found no reference to that point in any of the literature that I have picked up, but I assume that that is the case.
	The second question, which the Government have been asked on previous occasions, relates to the limits of £6,000 and £12,000 that were referred to. Are those limits to be regularly upgraded? If they become frozen in time—

Baroness Hollis of Heigham: My Lords, which limits is the noble Lord referring to? There are no capital limits. There is simply notional income from whatever capital a person has.

Lord Addington: My Lords, I thank the Minister. The uprating of the income is what we are worrying about.
	The next point relates to a serious disagreement. The Government have gone down a means testing—they prefer the term "targeting"—route in an attempt to get resources to those who they believe need them. We on these Benches should prefer a more broad-brush approach. The basic argument between us is that money will have been saved on the bureaucratic nature of the system; therefore, we shall be able to give out a universal benefit, thus getting benefit to those who actually need it. Help the Aged concurs with our policy approach; namely, that an extra £10 per week for those over 75 would achieve much of the reduction in poverty.
	I agree that, overall, the Government seem to have listened to the criticisms levelled at them about the complexity of the system and its implementation. However, the main problem is that the system will be difficult. It is not merely a question of the aged being confused by such complexity. Our education system has not produced a large number of people in the lower income brackets who are comfortable with complex literature. It is a historical problem for which governments of all colours must share the blame. But people have simply stopped educating themselves in this area.
	I freely admit that I do not like the idea of lots of complicated forms. I am dyslexic and I have a bad short-term memory. There are many like me. There are many others who for other reasons have literacy problems. That is potentially a major flaw in the scheme. The Government have talked about the ways in which they will get round the problem—sending out forms to everyone, a telephone back-up service and various other elements of the system. This is the real challenge for the Government. Assuming that their targeting is correct—and we do not know that—they must make sure that they get to the people in question.
	The on-going costs of the scheme will increase the costs of the pensions system. It is merely a matter of how that balancing act occurs and how many people are missed. It is not a case of whether people will be missed, but of how many will be missed. It always is. It may simply be that a person is terrified of forms, or is not on the telephone, or does not like approaching an authority. From the age of 60, or even earlier, many people are like that.
	I hope the Government will bear that fact in mind and will realise that they do not have the perfect answer. There will be casualties. They will have to be prepared to pick those people up at some point. Ultimately, as always happens in our system, the health service and other services will find themselves picking up the failures of the system if they occur.
	I turn to the major flaw in the system; namely, its approach to women aged 60 to 65. The Minister made a very good attempt to square the circle and gave a full answer. However, those on state pensions should be brought into the system. It is worth repeating that there is a significant anomaly here. If a person happens to be receiving a state pension, why is he or she not included in this system? We know that it will come to an end and that there is a series of finite problems. But surely that is a major flaw.
	I could talk about this subject at considerable length. However, because other speakers have covered most of the points I had intended to make, I leave the House with just one thought. Unless we are prepared to be slightly flexible and admit that there are faults in this approach—which means going back and putting in place extra layers to correct them—we shall have greater problems. We have gone down a road in this Bill which will probably make matters more complicated in the future, not less so. I hope that all those who have a responsibility in this area, if they agree to this system, are prepared to pick up the tab to make sure that this targeting is at least done with a decent sight.

Baroness Noakes: My Lords, as a neophyte on matters of pensions and benefits, I was delighted to find that I was in excellent company with the other neophytes, the noble Baronesses, Lady Andrews and Lady Barker. We were treated to an excellent introduction by the powerful and contrasting speeches of my noble friend Lord Fowler and the noble Baroness, Lady Castle, together with many of the other usual experts who regale us in these matters, led by my noble friend Lord Higgins and the Minister. Perhaps the Minister did gallop but I never found her indistinct.
	I shall start by talking about complexity. I make no apology for venturing into this area, as predicted by the Minister, and referred to by many speakers. The new pension credit is mind-blowingly complicated. If anyone doubts that, I refer them to the definition of "savings credit" in Clause 3. I shall not read it out but I wager that even with her renowned fluency in benefit matters the noble Baroness, Lady Hollis, would have difficulty making it instantly understandable to noble Lords. I am well aware that the parliamentary draftsman finds it difficult to draft financial concepts in legal language, but I hope to find a more direct way of expressing these rules in statute as we consider the Bill further.
	Complexity is an important issue if we believe that citizens should be able to access and understand the laws that govern them. Some, like my noble friend Lord Fowler, say that benefits legislation is usually complex and that it is important for the Department for Work and Pensions to translate it into practical procedures. Tax legislation has become ever more complex and difficult to understand, but we should not accept inherent complexity without question. We know that with complexity comes error. An example appears in Clause 18, which we are told is to remedy a mistake made in earlier legislation. That is an example of why complex legislation is harmful. I hope that as the Bill proceeds through its Committee stage we shall strive to make it simpler.
	Another aspect of complexity is the heavy reliance on regulations, already mentioned by many noble Lords. The Bill lays out the bare bones of the framework for the new pension credit, but to find out how it works we have to refer to regulations. The first three clauses, which deal with entitlement, guarantee credit and savings credit refer to five sets of regulations and seven prescribed amounts or percentages. There is more of that in the rest of the Bill.
	The Bill proposes a scheme that has not been worked out in fine detail, or even in much detail at all. Even the simple concept of how income will be taken into account in calculating the savings credit will require reference to regulations made under Clauses 3 and 15. My noble friend Lord Hodgson asked important questions about how dividends or ESOPs will be treated and about equity in a person's own home. There are other questions to be asked. How will PEPs and ISAs be treated? What about pension funds that are not drawn down as annuities and index-linked savings? How will they be treated?
	I hope that as we consider the Bill in detail the Minister will tell us what the regulations will contain. My noble friend Lord Higgins asked when the Minister expects to have draft regulations available. I hope that they will be available at Committee stage.
	I turn to the question of the direct cost of the new pension credit, about which my noble friend Lady Fookes spoke so clearly. The Explanatory Notes say that the Bill will cost about £1 billion in 2003-04 rising to more than £2 billion in 2004-05. I understand that the difference between the two early years is because the new savings credit will not exist until October 2003—in nearly two years' time. The Government have raised expectations that pensioners will benefit from the new credit scheme, especially those with savings. Why do they have to wait so long? Is it because the department cannot process the claims quickly enough? I hope that the Minister can shed some light on that.
	What assumptions are being made about overall take-up? The noble Baroness, Lady Castle, spoke about that issue, and the noble Baroness, Lady Greengross, referred to the difficulties involved in getting pensioners to take up means-tested benefits. Is it assumed that all entitled pensioners will have claimed what they are due by 2005, or will further costs emerge as time goes on and further claims are made? We know that about 20 per cent of potential MIG claimants fail to take up their entitlement. What assumptions are being made about the take up of pension credit of £2 billion in the estimates for 2004-05? Can the Minister say what will be the total cost if there were to be 100 per cent take-up, if, as I assume, the assumptions are made on less than 100 per cent take-up?
	What are the department's estimates of the long-term cost? I understand that about £2.25 billion is in respect of minimum income guarantee, which will in effect be subsumed into the new pension credit and that the £2 billion is on top, so that when the new scheme is fully operational we are talking about a starting point of around £4.3 billion. Many noble Lords have pointed out that the estimates of much higher costs made by a number of commentators, including the Institute of Public Policy Research, which could not be described by any stretch of the imagination as a Right-wing think tank, are not sustainable. Based on calculations of up to £10 billion of long-term cost, it has calculated that the Government's proposal is not sustainable in the longer term. Does the Minister agree? If not, will she say how it will be funded in the longer term?
	I turn to the incentives to save. Most noble Lords will agree that preserving savings incentives is an important aim if we are to avoid a culture of dependency on the state. The Bill takes an artificial approach to capital and income, using a deemed interest rate which the Explanatory Notes say will be 10 per cent on capital that exceeds £6,000. The noble Lord, Lord Addington, asked a question on uprating. He was possibly referring to the uprating of the £6,000 starting point that is included in the calculations. My question is slightly different. Does it mean that for all purposes the first £6,000 is to be disregarded, or does the 10 per cent rate apply to all capital if it is over £6,000? If a pensioner has £7,000 of capital, is his deemed income 10 per cent of £1,000—the excess over £6,000—or £7,000? By nodding, the Minister has answered my question. It is based on £1,000, which is the excess over £6,000. I thank the Minister for that.
	Whichever way the figure is calculated it is clear that income deeming provisions will operate against those whose return is less than 10 per cent. That will apply to most pensioners because they will be deemed to have income that they do not have. A pensioner with capital of £25,000 who was lucky enough to receive a 5 per cent return would have an income of about £24 a week. But, under these provisions, he will be deemed to have £36 or £37 a week, which is how the credits will be calculated. He will end up not having the full amount of the deemed income and will be only a few pounds better off than if he had not saved at all.
	I am far from sure that the new credit scheme will prove an incentive to saving. As my noble friend Lord Higgins pointed out, as the guaranteed credit rises with earnings over the next few years, that discouragement to save will become even greater. I am sure that we all want to avoid that.
	The Bill refers to concepts of family. Pensioners who are married will do less well than two single pensioners, but so will an unmarried couple of pensioners living together as man and wife. I am sure that noble Lords are aware that old people are often lonely and, for all kinds of reasons, will wish to share their homes and their lives. Will the Minister explain why, when a male pensioner lives with a brother or sister or with another male, they will both have a single person's entitlement to pension credit, but if he lives with another female he may be deemed to be part of an unmarried couple, with the consequence that they receive less in total? How is living together as husband and wife to be interpreted in the rules? Are sexual relations to be a prerequisite? If so, how is the department to ascertain the information? Is this to be another intrusion into the lives of pensioners? Will the Minister also explain why homosexual relationships are to be favoured by allowing both parties to the relationship to receive a single person's entitlement?
	Lastly, perhaps the Minister will say exactly what is intended in respect of polygamous marriages? Is it intended that the regulations that could be introduced under Clause 12 will allow higher pension credits to be paid to men or women who have more than one spouse?
	My final topic is administrative costs. My noble friend Lady Fookes touched on the subject and the noble Baroness, Lady Castle, remarked on the lack of information about it in the Explanatory Notes, which say that the administrative costs will be discussed with the Treasury in the next spending review. Well so will everything. Are the Government saying that they do not yet know what the administrative costs will be? As many noble Lords have said, the aims of the new pension service seem admirable, but they do not sound particularly cheap, especially in the short term. When will we be told the administrative costs of the new arrangements?
	I am sure that there will be many more detailed issues to discuss in Committee. I thank the Minister for the explanations that she has given today and at the very helpful briefing that many of us were able to attend last week. I look forward to hearing her response today and to our detailed consideration in Committee.

Baroness Hollis of Heigham: My Lords, I am pleased that the Bill has had a broad, if cautious, welcome around the House. As the noble Baroness, Lady Noakes, said, this has been an extremely well informed debate, as one would expect with contributions from two former Secretaries of State on the subject and a junior Minister, as well as others with practical experience on pensions or with Age Concern. I would expect nothing less. I am even delighted that my noble friend Lady Castle welcomed the principle of rewarding thrift. I think that she was claiming credit for the concept for herself and our noble friend Lady Turner, whose absence we have missed today. She has helped me very much over the years on pension matters. I hope as a result that the Bill will enjoy their warm support. That view was challenged by the noble Lord, Lord Fowler, who also wanted to introduce such a Bill, having said at one point in his speech that on no occasion did he ever agree with the noble Baroness, Lady Castle.
	I am not sure what it means when so many people claim credit for the Bill when on other occasions they never agree. It shows that the Bill is perceived as a serious attempt to address a real problem that everyone has identified. At its simplest, that problem is how to ensure the provision of a basic, decent minimum income for people, in such a way that it does not deter them from seeking to make such provision for themselves.
	If that is called squaring the circle, so be it. If it is called galloping horses, in the metaphor chosen—whether elegantly or not I am not sure—by the noble Baroness, Lady Fookes, I plead guilty. It is an insuperable problem in social security. Our suggestion is to adopt a targeted and tapered response, because the alternative of universality not only misses the target, but does so at enormous cost.
	I shall address the major issues that have been raised by several speakers. I started counting the questions that were asked, but I stopped at 80 or 90. Noble Lords will understand if I do not reply to all their questions tonight, but I shall write to them. I would love to have an hour to reply to all the questions, but I cannot do so unless I speak even faster than I did to start with.
	The big strategic issues are complexity, means testing, capital rules and the pension service. If time permits, I shall also seek to come back on some of the more detailed questions, which are also of interest to the House, including the situation of part pensioners, housing benefit, hospital downrating, residential care, the future of occupational pensions, cost, reassessment rights and the like. I shall see where I have got to by the time that your Lordships are looking distinctly glazed, and/or bored, and/or asleep.
	As the noble Lord, Lord Higgins, conceded, I tried to address the issue of complexity when I started. The structure is simple, but social security and pensions are both complex, and if the two are brought together there is inevitably a geometric increase in complexity. We know that there will be two parts—a £100 basic income together with 60 per cent of the next £23 of income, which is the difference between the £77 retirement pension and the £100 MIG.
	Working out the details is complex, but the complexity arises most obviously when people have an incomplete retirement pension record. Estimating that is complex even now. The structure is simple, as I have just said, and the information required is far simpler. I shall come back to that point. The capital rules have been greatly simplified and once the assessment is made it remains in place for five years unless there are major changes. The noble Baroness, Lady Greengross, asked me to elaborate on such changes. They include the death of a partner, going abroad, going into hospital or changing house and having seriously different housing costs. Those are the major life events involved. However, it is a win-win situation for pensioners. They can seek to be reassessed, possibly because their income has dropped, at any time that they wish. They may only need to be reassessed every five years, unless a major event occurs. I shall also come back to the pension service, to which my noble friends have spoken so eloquently.
	I have a couple of points to make on draft regulations. This is a framework Bill. It is impossible to achieve the elegance of a modern novel in legislation that amends previous legislation—although, as one of my noble friends said, not all modern novels are as comprehensible as the Bill. I hope to have the draft regulations for your Lordships during Committee stage. They will deal with some of the issues—such as polygamous marriages and so on— which have clearly concerned some of your Lordships, including the noble Earl, Lord Russell, on uprating. I am not sure why polygamous marriages should suddenly be of such fascination to your Lordships. I can only think that it was either hope deferred or aspiration being pursued. The noble Baroness, Lady Fookes, also asked about draft claim forms. I hope to have them available in Committee. I have the current MIG forms.
	The crucial part of what I was trying to say is that by going for targeting and tapering we are seeking to move away from vocabularies of means testing to vocabularies of entitlement, as my noble friend Lord Lea said.
	I was asked whether extending means testing will discourage those who need help from claiming. It is no longer sensible to give everyone the same. The latest figures, for 1998-99, show that the average pensioner income was £272. The bottom one fifth of couples received half that sum. The top fifth received double. Where such disparities of income have grown over the past 20 years, it cannot be right to give the same to all.
	My noble friend Lady Crawley pointed out that giving the same to all would not end means testing. My noble friend Lady Castle talks as though if everyone were uprated to MIG and earnings-related, there would be no need for means testing. She is misinformed. Even if there were earnings-related additions, two thirds of recipients on MIG would still be affected. If the earnings link had never been broken, nearly one half of all pensioners would still need an income-assessed, targeted benefit because either they have incomplete pension records or have extra cost disability benefits.
	Whatever system is used, there must be targeted benefits. What matters is to remove the stigma, improve communication, and ensure entitlement and take-up. To achieve that, we are seeking to map income at retirement and every five years—so there will not be weekly intrusion. We are not asking pensioners to come into an office for a "Full Monty" assessment. The matter can be dealt with in the privacy of their own home. Some 70 per cent of people already set up and handle their retirement pension by telephone. I am sure that proportion will grow.
	With income support, we currently need to know whether any child maintenance payments are being made—particularly in the case of a younger spouse with children from a much earlier relationship. In future, those payments will be ignored. At present, we need to know the number of hours worked. In future, they will be ignored. If a pensioner has returned to college or university for third-age learning, any educational support in the form of grants or loans will in future be ignored. Any personal injury payments, which are taken into account in various ways at present, will be ignored. Charitable and voluntary payments are to some degree taken into account at present. In future, they will be ignored. Rent from any land or second property will be ignored, as will capital sums in building societies, PEPs or ISAs—but the notional income will be taken into account.
	I could treble that list but it gives your Lordships some indication that lines of assessment rightly seen as intrusive now will be stripped out of pension credit in order to get the core information needed. The assumption will be that pensioners' incomes stay steady except in the case of life-changing events. We can therefore take that interference and intrusion off pensioners' backs, so that they can enjoy a predictable income as of right.

Lord Higgins: My Lords, I am puzzled by the Minister's use of the word "ignored". Are we to understand, for example, that income from an ISA will not be taken into account in the calculation—that is, that it will not affect the individual's benefit?

Baroness Hollis of Heigham: My Lords, capital will be ignored but the income from it will be taken into account. At present, where a person has three or four small building society accounts, all that capital comes into play. If it exceeds the £6,000 or £12,000 range, that capital will disqualify the individual from MIG top-up, even though he may have a modest retirement pension.
	In future, it will not be necessary to see every building society pass book. There will be an assumption made about the flow of notional income from the capital held by pensioners. There will be no individual assessments based on the capital in each account. All that will interest us is the notional income, not the amount of capital—which could otherwise cut off entitlement. One can have capital of up to £36,000 as a single pensioner. The notional income would still just about bring the pensioner within pension credit, if he or she has no other income. I hope that that explanation meets the noble Lord's point.

Lord Higgins: My Lords, I do not understand. Is the Minister saying that the value of a PEP will be taken into account and that the deemed income derived from it will affect the pension, or will the actual income from the PEP be taken into account? Given what happens to the value of PEPs on equity markets, goodness knows how that will work.

Baroness Hollis of Heigham: My Lords, it is the deemed income. That is the point of the simplicity of the rules. I will return to that matter after I have addressed other questions. All capital will be lumped together and a deemed notional income will be extracted. The simplicity compared with the existing system is that once an individual's capital holding goes above a certain figure, he or she is denied any support. That will no longer be the case. The notional income, not the capital ceiling, will come into play. That is where the new simplicity and greater generosity comes on board.
	We are assuming two thirds take-up in the first year. Take-up in the first year of family credit was about 50 per cent. By 1998-99, take-up was about 80 per cent in cash terms. After moving to working families' tax credit, about half those who could have claimed family credit but did not went on to draw WFTC. One reason was that the amount individuals would have drawn in family credit was tiny. Any benefit takes time to build. I have no reason to think that pension credit will not build in an equally satisfactory way.
	I was curious that the noble Lord, Lord Higgins, denounced the Bill for bringing so many pensioners within means testing because the minutes of the all-party group on disability—my bedside reading—on Tuesday, 27th November, included a contribution from the noble Lord's honourable friend, Mr. Boswell. He suggested that the group should consider ways of targeting the 29 per cent of pensioners in fuel poverty and the 22 per cent of disabled people in fuel poverty instead of the current universal approach to pensioners. Mr Boswell was not calling for no means testing of pensioners but for the targeting—presumably means testing—of the universal winter fuel payment for pensioners.
	I wonder whether Mr Boswell consulted the noble Lord, Lord Higgins, to ensure even a modicum of consistency between the Opposition's approach in the two Houses on the issue of means testing. Left to Mr. Boswell, we would means test the universal benefits that we already have; left to the noble Lord, we would universalise the means-tested benefits that we have It would be nice if the honourable gentleman and the noble Lord could agree their position on that and related issues before Committee stage.
	The noble Lord, Lord Higgins, said that somebody with a part-pension would be treated unfairly compared with someone who made a full national insurance contribution. The noble Lord adopts a curious position. It seems to me that someone who has made the full national insurance contribution all their working life should not be treated in the same way as someone who has not. It is right that retirement pensions and recognition to pension credit should reflect that.

Earl Russell: My Lords, in an increasingly global economy many people spend part of their lives working out of this country—for reasons for which they deserve no reproach.

Baroness Hollis of Heigham: My Lords, that may be so but it is a question of whether such persons are contributing towards the funding of the retirement pension that they will subsequently draw. I refer to the case suggested by the noble Lord, Lord Higgins, where someone with a pension of £67 and an occupational pension of £25 would, at the moment, see no advantage because that would keep them below the £100 ceiling. In future, under the new system, they would get a guarantee and a pension credit, and their total income would be not £100 but £109. Therefore, although they would not be in the same beneficial position as someone with a full contributions record, they would still be better off. I hope that the noble Lord thinks that that is a balanced approach.
	Some noble Lords have said that the proposals are unfair to those who have deferred pensions. We are treating people as though they are drawing their retirement pension, as it would be unfair to give them a pension credit if they are not drawing their pension. Pension credit follows retirement pension, it does not precede it.
	The noble Baroness, Lady Noakes, asked about people who are simply living together. I wonder whether her noble friend Lord Fowler might help her on this issue. There are simple, standard and well-defined social security rules on whether cohabiting couples qualify as a household. Those rules will be applied in the operation of this legislation as they are elsewhere.
	The noble Baroness, Lady Barker, asked about the title, and I must say that I too am not awfully keen on "state pension credit". However, her own suggestion of pension savings reward identifies only half of our objectives. We are trying to integrate the guarantee with the savings credit. That is why we chose the title.
	The noble Lord, Lord Addington, said that we are being unfair to women of 60 and asked why we cannot provide the pension credit to women when they qualify for the state retirement pension at 60. As I have tried to explain, to do that we would have to extend the provision also to men at 60, regardless of whether they were receiving the state retirement pension. It is a dilemma. Although I understand entirely where the noble Lord is coming from on the issue, as I have tried to explain, we have equalised the guarantee element—which goes to the poorest—at 60 and the reward element at 65. We are seeking to treat men and women fairly at each stage.
	I think that I have already dealt with the point on re-assessment. The noble Baroness, Lady Barker, specifically raised the issues of housing benefit and council tax benefit. As I said, we are carrying over a higher personal assessment allowance in housing benefit and council tax benefit so that people can enjoy the benefit of pension credit. That advantage could be realised by, for example, pensioners who are not eligible for pension credit but who have high rents and receive housing benefit. I therefore think that it is a decent and generous response.
	As I have said in previous debates, the point of hospital down-rating, which is a modest sum—I think that it is about £14 for a couple after six weeks, but a more substantial sum after 52 weeks—is to reflect the fact that social security has never gone in for double payment for the same contingency. Therefore, if part of one's costs—for food and laundry, for example—are being met by the national health service, one cannot reasonably expect those costs to be reflected in the retirement pension.
	My noble friend Lady Andrews and the noble Baroness, Lady Barker, asked about care homes. I can tell your Lordships that no one will be worse off because of the proposals and that people in residential care or care homes will enjoy both the savings element and the guarantee element. Whether local authorities go on to recover all or part of that in increased charging will be for them to determine in consultation with the Department of Health.
	My noble friends Lady Gibson and Lady Crawley eloquently described the purpose of the pension service. Although it will be based on a telephone service, a local face-to-face service will also be available for pensioners who need it, particularly those who are frail and find it difficult to leave their home. The service will deal, for example, with winter fuel payments, retirement pensions, the state second pension, and also serve as a single gateway to provide pensioners with access to housing benefit and attendance allowance. It will produce an integrated service that will be highly valuable and help to ensure that pensioners take up the full range of services to which they are entitled. I tell my noble friend Lady Greengross that we expect to start rolling out the service in spring 2002.
	I return to capital limits. Clearly, we could have chosen not to have a £6,000 de minimis rule. Instead, we could have established a notional income limit for all capital and said that people are outside the pension credit system when that notional income surpasses the pension credit figure. Such a notional figure would probably have been about 5 per cent, 5.2 per cent or 5.5 per cent. The exact figure is arguable, but those estimates are not unrealistic.
	Why did we choose not to do that, but decide instead effectively on a disregard of the first £6,000 and to recover the equivalent figure from the rest of the sum? We did it because pensioner organisations asked us to do it, because 85 per cent of pensioners have savings of less than £6,000. Consequently, our response seemed to be the decent one. By adding the lower notional rate—which we are reducing to 10 per cent from the current 20 per cent—to the savings reward, the savings in pension credit for very low income pensioners will be treated five times more generously than they are currently treated in the MIG. I think that that figure shows the scale of our changes.
	I was asked about disability benefits by the noble Lord, Lord Addington, who has a proud record in protecting those benefits. I am happy to give the assurance that extra-cost benefits will be ignored and that the higher income-related benefits for severely disabled people will of course continue as they are.
	The costs issue was raised in two forms: programme costs and administrative costs. The noble Baroness, Lady Noakes, was right to say that we are expecting programme costs to be £2 billion in the early years, increasing to about £3.4 billion by 2010. We shall shortly be publishing an analysis of the long-term costs for pension credit, setting out the assumptions on which our analysis is based. Clearly, different assumptions on prices and other matters come into play. However—in reply to the point made by the noble Lord, Lord Henley—we are confident that those costs are sustainable, not only as a proportion of GDP, but because investment in the private pensions industry has served us well. I pay some credit to the previous government on the latter point. Moreover, given that the United Kingdom demographic explosion has already occurred, we do not have a pensions crisis. We continue to have a better ratio of those in the labour market to those who are retired than most other European countries.
	Your Lordships might be interested in the figures on administrative costs. Setting up an initial claim for the retirement pension costs on average £31, and we do not expect that the initial cost of setting up the pension credit will be very much higher than that. Although it will be a little higher, it will not be much more. In reply to my noble friend Lady Castle, the annual administrative cost of the retirement pension is essentially nil, and the cost of up-rating pensions will be essentially nil as it will be done by computer. The five-year review will obviously bring into play different factors.
	A number of your Lordships, including the noble Lords, Lord Higgins, Lord Fowler and Lord Hodgson, have dealt with the fate of occupational pensions. They seemed to sense a vulnerability in occupational pensions because of what they allege are moves by employers to close final-salary schemes in favour of money-purchase ones. Although I think that such a move is beginning, the schemes that have closed so far are fairly small ones. The NAPF report, however, suggests a rather different story. In the past year, about 46 per cent of all employers in final-salary schemes either had a pension contribution holiday or were able to make reduced pension contributions, which they did not actually pass on to their employees.
	The current state of the equity market and the transparency required by FRS17 are requiring employers again to meet pension promises in relation to which some of them have not had to make contributions in recent years. They are really rather perturbed by the size of those promises, although, three to seven years ago, they took it for granted that they would have to contribute towards meeting them. Consequently, as the NAPF report makes clear, employers are moving to money-purchase schemes, not only to reduce the risk, but to reduce the contributions that they should make. That is the problem.
	Something like 88 per cent of employers in money purchase schemes contribute less than 10 per cent. Some 47 per cent, or thereabouts, of employers in final salary schemes contribute less than 10 per cent. In other words, almost double the number of employers in money purchase schemes contribute less than 10 per cent. If employers were to contribute to money purchase schemes in the way that they contributed—when they contributed fully—to final salary schemes, the problems of long-term pensioner poverty for occupational pensions would not be of the size or order that have been described. The returns would be broadly similar.
	In other words, the problem is not one of FRS17 but the fact that employers are using the move to money purchase schemes to reduce their contributions. Unless that shortfall is made up by employees, they will get a smaller pension. As far as I can tell from the NAPF report, that is where the responsibility resides.
	I return to a point made by the noble Baroness, Lady Barker, when she referred to a technical Bill. Inevitably, it is a technical Bill as it is both a social security and a pensions Bill which deals with highly complex matters. But behind it lies a simple principle; that is, how we ensure that pensioners are lifted out of poverty to a decent income and how we build on that by rewarding the thrift of those who have modest pensions. In other words, we are protecting the poorest pensioners from an impoverished standard of living while helping to reward the thrift of those who would otherwise be nearly poor.
	It is incumbent upon the whole House to give the Bill full scrutiny and I am sure that it will do so. As my noble friend Lady Crawley said, this is a good and decent Bill. I believe that it is the final bit of our jigsaw to ensure that both those saving for their future pensions and current pensioners can look forward to a decent and comfortable future. I commend the Bill to the House.
	On Question, Bill read a second time, and committed to a Committee of the Whole House.

Athletics

Lord Glentoran: rose to ask Her Majesty's Government what they consider to be the future of athletics in the United Kingdom.
	My Lords, the previous two debates on sport in your Lordships' House in which I took part were introduced by the late Lord Cowdrey. Therefore, it is with some temerity and a touch of sadness that I follow in the footsteps of that great and much loved friend. However, although one great sportsman has left us, another has joined our number. I am delighted that the noble Lord, Lord Coe, is to make his maiden speech today in this debate. I very much look forward to hearing what he has to say as there can be few, if any, who can speak with his knowledge and expertise on these matters.
	A great deal has been written and said in the past few years, and particularly in the past few months, about national stadiums being linked to events such as the football World Cup, the World Athletics Championships and hosting the Olympic Games. The 2000 World Cup bid was included in the Government's 1997 election manifesto. Sport England has given £120 million to the FA to build a stadium capable of holding international athletic events as well as international football of all kinds and to bid for and host the World Cup. It was also the Government's stated intention to support a bid from the AAA for the World Athletics Championships in 2005. That bid was won for London, but that, as we all know, was not to be. The story of "Unpicking the Lock" can be read in Hansard of another place of Tuesday 11th December and, of course, in the Select Committee report itself. The facts are that we have no national stadium—not that I think that that is any kind of a disaster as I shall explain later—and no world cup for either football or athletics. But what of the £120 million? That is still held by the FA.
	I shall say a few words on stadiums. Some of the best football nations in the world do not have a single national stadium. France has the Stade de France. Others do as we have been doing since the demise of old Wembley; that is, use Premier League grounds for football internationals alternating around the country. That gives access to a much wider spectator group geographically. If that were to become a national strategy, some of these stadiums might need enlarging by up to 10,000 or so seats.
	Athletics do not lend themselves as spectator sports to large stadiums. There is too much going on in the arena at the same time for anyone other than a real aficionado to be able to see, understand or follow from the back or even the middle of a large stadium. I suggest that it is only events on the scale of the Olympic Games that need a 60,000 seater stadium or larger.
	What facilities are already available for promoting international athletics in this country? We have Gateshead in the North East; Crystal Palace in London; Birmingham in the Midlands and Sheffield in Yorkshire. I understand that all those stadiums meet IAAF requirements for international events. So what went wrong with the Government's plans? I shall attempt to give your Lordships a flavour of the debate in another place where the right honourable Mr Kaufman referred to the Select Committee report "Unpicking the Lock", as a "sorry and convoluted saga". He went on to say that the DCMS involved itself beyond its locus and vires in decisions on both the national stadium and an athletics stadium. His advice to the Secretary of State for the DCMS as regards stadiums was,
	"to keep out and shut up; it is none of her business".—[Official Report, Commons, 11/12/01; col. 743.]
	I have to say that I agree in the most part with the right honourable gentleman. Of course, he was right when he said that there has never been a co-ordinated policy under any government in relation to national bids for the Olympic Games or for any bids for other major events such as the World Cup or the World Athletics Championships. In these days of high cost expectancy and the high level of commercialism in international sporting events, should these decisions be left to the various governing bodies and private sector funding? I believe that there must be a role to be played by governments here in support of the private sector in co-ordinating and facilitating the hosting by Britain of world events. In the same debate in the other place Kate Hoey said that,
	"The way we run sports and major sporting events and build—
	or do not build—
	"national stadiums is a shambles".—[Official Report, Commons, 11/12/01; col. 758.]
	I hope that your Lordships will agree that that state of affairs must end.
	I turn to the "devolution effect", as it has had an effect. Devolution has led to divided loyalties and a proliferation of government bodies involved in sport each with its own agenda and funding sources. I refer to Sport England, Sport Scotland, The Sports Council for Northern Ireland and The Sports Council for Wales which all report to their respective devolved Parliaments. England has Sport England and the English Institute of Sport, which are lottery funded with a capital budget of £120 million, in nine regions to provide a wide range of facilities for elite athletes. UK Sport and the British Olympic Association are the only United Kingdom and Northern Ireland overview bodies. The United Kingdom competes only as a single nation in the Olympic Games once every four years. What should the role of those bodies be? The British Olympic Association, as its name suggests, is Britain's lead organisation for the Olympic Games and must be factored into whatever strategy evolves in a way that allows it to carry out its role most effectively. It seems to me that Sport England could become its link to government.
	As regards finance for sport, I submit that any government extolling or interfering with national sport must be prepared to fund their exhortations. The share of the lottery money for sport has reduced considerably on account of the Government's new beneficiaries; that is, the New Opportunities Fund and NESTA, and also because the lottery is providing less funds. In 1997 Sport England received £250 million from the lottery and for 2002, the estimate is £185 million. The Exchequer's grant for Sport England is only £35 million when compared with grants to the Arts Council of £237 million and to English Heritage of £115 million. The figure of £35 million is a pittance.
	The Exchequer's share of sports funding needs to rise in real terms. I do not mean just a bigger grant from DCMS. There should be better use of "joined up government"; for example, the Home Office contributing to anti-drugs schemes or young offenders' schemes. Incidentally, a preliminary preview of eight of the jointly funded Sport England/Home Office "Positive Futures" projects demonstrates significant successes. I suggest that more such schemes are needed.
	It has been demonstrated again and again that as regards the Department for Education, schools with good records in PE and school sports report higher attainment overall. Turning to the Department of Health, it has been estimated that 37 per cent of coronary heart disease could be attributed to inactivity. Sport can be used to tackle obesity, for example, which is currently a problem costing the National Health Service £500 million a year, to say nothing of days lost to industry from the same problem.
	As regards the environment and communities, sport can play a key role in helping to create communities and a community spirit, but it will need proper funding and management to achieve that.
	"Joined up government" for sport means cross-departmental funding, cross-departmental support in providing the infrastructure for elite sport, school sport, club sport and, by no means least, sport for all, including the handicapped. Most important of all, I believe that British sport needs a clear, all-encompassing strategy led by the Government and implemented by the governing bodies and the private sector.

Baroness Billingham: My Lords, I thank the noble Lord, Lord Glentoran, for his Unstarred Question, which gives us an opportunity to debate this important issue. But before beginning, perhaps I may express my absolute delight at the running order in tonight's list of speakers. I am surely going to be one of the very few people in the world who will be able to say, "I finished ahead of Seb Coe!". I look forward enormously to his contribution. It has already been said that it would be impossible to find anyone with greater knowledge, experience and expertise in athletics. We are indeed fortunate to have him with us in the Chamber today.
	Tonight's question asks about the future of athletics in the United Kingdom. Looking round the Chamber at the speakers on all sides, it is clear that every one of them has played a positive and enthusiastic role in sport in the past. Therefore, I believe that it is inappropriate to bite chunks out of each other with recriminations as to who did more damage or who has more commitment. I wish to take a broader view of athletics. But of course we cannot ignore the past nor the mistakes that have been made which have damaged many sports.
	In 1996 the collapse of the British Athletics Federation was indeed a significant low point. To some extent that culminated in the decision to scrap Picketts Lock, with all that that entailed. But looking back much further to the 1970s no less, we can identify the last major build of sports halls and complexes. The circumstances were bizarre. Local government reorganisation meant the scrapping of old councils and new ones put in their place. The old hated the new and as vengeance spent all the balances and reserves rather than hand them over to the successor councils. I was a new, inexperienced councillor in Banbury and I saw it all happening at first hand. A new sports hall and complex, Spiceball Park, was built. More accurately, it should perhaps have been called Spiteball Park. But it was much needed and welcomed. It improved the facilities in the town. The only athletics track of any merit built in Banbury in the 1980s was on a school campus, but only after a swathe of the school's playing fields were sold off to developers to pay for that facility. So there were two good outcomes from two bad processes, but that should not be used as a template for the future.
	Neither could or should we ignore the damage done to school sport throughout the 1980s and the 1990s. The national curriculum acted like a cuckoo in the nest tossing PE out of the timetable and wrecking after-school activities. Local authorities, cash strapped and capped, had no capability of improving facilities for sport or initiating athletics programmes.
	Having looked back, what of the future? What lessons have we learned and what should we improve? We must acknowledge the financial support provided by lottery funds. It is difficult to find any major project which has not benefited from them. The Government have put sport, with health, education and social inclusion, at the very heart of their programme. Resurrecting school sport, with a minimum of two hours per week, with school sport co-ordinators and trained PE specialists, is going to be the first part of that programme. Giving £581 million to sports facilities in every LEA in England and a further £130 million for Space for Sport and primary schools, are surely tangible examples of progress for sport in general and inevitably for athletics in the future.
	Turning to the heart beat of British sport, we need to look no further than amateur clubs run by volunteers. They may well have helped the noble Lord, Lord Coe, reach his potential. There are also small tennis clubs like the one that helped my daughter on her way to play tennis at Wimbledon. These are at last being recognised, whether by tax concessions or charitable status. They will find new impetus in the years to come as a direct result of government intervention.
	The UK Sports Institute is an exciting project which will give the essential skills and training opportunities to improve the performance of our most gifted athletes. We have witnessed similar schemes abroad. Our own centres of excellence are long overdue.
	We are also bringing in new guidelines and are determined to stop once and for all the sale of playing fields. There will be no more getting around the rules. It has to be done. At the same time that legislation will make it easier not only to provide new sporting facilities, making it mandatory for local authorities to provide a full audit, but also to alter the planning balance so that existing clubs can upgrade facilities providing playing and training opportunities fitted to this century and not to the middle of the last. Stupid objections to floodlights and simple basic improvements can bring small clubs to their knees. They will now get better government support.
	There should be hats off to Richard Caborne who said recently,
	"In sport, as in many other areas, one-size-fits-all programmes imposed from London are not the solution to problems which take different forms in different places".
	Amen to that. Let us see flexible local delivery of programmes with a mix of public and private funding, with schemes wanted by local residents. There should be more region and less regimentation.
	Finally, I shall go completely off-message in the belief that, so near Christmas, no one will read Hansard, and tell noble Lords my two Christmas wishes. First, the Minister for Sport, far from having too much power, has far too little. He should have more power to be a force at the heart and at the beginning of major projects, rather than trying to pick up the pieces of damaged schemes. Secondly, we should take a very good look at the facilities in the rest of Europe. How come every large village or small town has almost certainly a stadium and a range of sporting facilities funded and maintained by local government? Cannot we do the same? We can and do host world-class events such as Wimbledon, Open golf championships and so forth. Next year we shall host the Commonwealth Games.
	There is much to celebrate. Let us build on our positive initiatives and enable talented performers to emerge not despite of but because of excellent sporting opportunities. We look forward with confidence and eagerness to the next Sebastian Coe, or even Sabrina Coe, and make a reality of the slogan "Sport For All" for all abilities and in all activities.

Lord Coe: My Lords, I should declare that I am currently President of the Amateur Athletic Association of England and non-executive chairman of Fasttrack, a company which promotes the commercial interests of British athletics.
	I rise to address this House for the first time in what, judging by the list of speakers, promises to be a debate of extremely high quality and on a subject obviously dear to my heart. I immediately compliment my noble friend Lord Glentoran on not only initiating such a timely debate but on so eloquently and elegantly making his case. It will have come as no surprise to your Lordships that my noble friend Lord Glentoran, with his own distinguished and unique contribution to British olympism, should have spoken with such passion and great common sense on the current difficulties faced by the sport of athletics, arguably the cornerstone of the Olympic Games; I say "arguably" before I am laid siege to by swimmers, rowers and gymnasts.
	My noble friend Lord Glentoran made his own sporting history by sliding with considerable style to Britain's first and only Olympic gold medal in the two-man bob at the winter Olympic Games in Innsbruck in 1964. I slid, less elegantly, from the House of Commons in 1997. But, like all retired athletes, I am now happy to settle for a more sedate pace in a more rarefied atmosphere.
	British athletics and Olympic sport have much to be grateful for the past endeavours and contributions made by many Members of this House. My noble friend Lord Higgins was part of the British Olympic team in 1948 and 1952 and the Empire Games in 1950. The late Lord Luke, the father of my noble friend, was a formidable and independent member of the International Olympic Committee. Some have even made it from the committee room to the silver screen: Lord Burghley, the Sixth Marquess of Exeter, was a gold medallist in the 1928 Olympic Games and a silver medallist in 1932—exploits that inspired the character of Lord Lindsay in the great film, "Chariots of Fire".
	Beyond athletics, I feel that I really must mention my noble friend Lord Moynihan, who, as a cox in the eights, won silver medals at the 1980 Moscow Olympic Games and the 1991 world championships. Your Lordships will no doubt remember the occasion when the rudder broke and my noble friend was faced with an unpredictable boat that could veer off course at any moment—an event that undoubtedly helped to prepare him for government!
	Athletics has never been our foremost national sport. The British love of soccer has been a long affair. But athletics has given us some of the most memorable moments in the history of British sport. Who can forget Eric Liddell and Harold Abrahams in Paris in 1924; Roger Bannister shattering the four-minute mile in 1954; Lynn Davies's and Mary Rand's Olympic titles in 1964; Daley Thompson, Sally Gunnell and Jonathan Edwards in more recent times; and Tanni Grey Thompson, with a remarkable achievement of 14 medals in four successive paralympic games.
	The strength of British athletics, the foundation stones of past success in major championships and the envy of much of the sporting world is the work done by the 1,500 athletics clubs. One of the most distinguishing features of this country is the voluntary work to be found in a raft of activities. There is no better example of this voluntary ethos than that found in British sport. In athletics, there is no better example than the work done by the army of unpaid coaches and administrators, often in our hard-pressed inner cities and our facility-starved rural areas, where coaching is commonly combined with some of the most sensitive and targeted social work to be found in any community. Nor must we ever lose sight of the role that these clubs have played in the crucial identification and sensitive development of many of those that are now on the roll call of honour. For them to go on playing that vital role, they will need proper resourcing and fiscal support. I ask the Government to look again at their refusal to place voluntary sports clubs on an equal footing with charities on their business rates.
	There are many in this House, and not just those who have been involved in sport, who understand the powerful force for good that sport brings into the lives of the people of this country and their communities. Athletics is not alone in this process, but it can claim almost uniquely to be a truly multi-racial sport with roots deep in all communities. The recent reports on the riots in Bradford, Burnley and Oldham found that:
	"Sporting opportunities can play an important role in re-engaging disaffected sections of the community, building shared social capital and grass roots leadership through improved cross cultural interaction".
	That is a description of athletics.
	At this moment, up and down the country, there are athletes and coaches striving to be the best. Over the past few years I have seen them in their thousands. They would never let anyone down. But today they are themselves being let down by poor organisation and serious shortcomings at national level. As Lamine Diack, the President of the International Association of Athletic Federations, told me last Friday:
	"I simply don't understand how Britain, a country with such a history in athletics, can get it so wrong".
	British athletics, on the record of the past 30 years, athletics has been this country's most successful sport. But, for all its strengths—we are ranked fourth in the world behind only the USA, Germany and Russia—it has not been without its problems.
	For all its successes on the track, when athletics has needed political help, it has had difficulty getting off the starting blocks. We won the right to stage the 2005 World Athletics Championships, but we lost that right through our inability to build an athletics stadium to host the event. I believe that our failure to host it is a serious and damaging blow to British athletics and a further dent in our already battered international reputation.
	When the Prime Minister said in January 2000 that Britain would look forward to hosting the World Athletics Championships in 2005, he stated:
	"World class facilities will be ready, our athletes will be ready and our people will be ready. We look forward to welcoming the world athletics family to London".
	Well, the athletes would have been ready but the facilities would not. So, if anyone wants to go to watch the World Athletics Championships, they will now have spend their money in some other city, which will no doubt gratefully receive it. It is hardly surprising that, within days of the London bid collapsing, serious offers were received from Berlin, Stuttgart, Munich, Budapest, Brisbane, Barcelona, Madrid, Brussels and Rome. The Secretary of State has said that the Government,
	"acted decisively to put in place a first class alternative in Sheffield, which will deliver the games . . . as a long term legacy for athletics in the UK".
	No one who knows anything about the world of international sport could possibly have thought that, having won the right to hold a world championship, you can casually move it to another city without reopening the bidding process.
	Those who talk of grass roots funding as an alternative to hosting these games should remember that there could be no bigger boost for the grass roots than a world championships broadcast on prime time television, blue-chip sponsorship and worldwide exposure for Britain. Imagine the inspiration for tomorrow's stars seeing the finest athletes competing in their own back yard. It would also have been a crucial platform for a British Olympic bid for 2012. The events of the past two years have made the task of putting together a serious Olympic bid not impossible, but certainly more difficult.
	I find it sad that a country that has helped to construct a global coalition against terrorism is unable to construct a domestic coalition to build a stadium. I find it depressing that a country that boasts the fourth largest economy in the world cannot afford to host the third largest sporting event in the world. And I find it alarming that a country that has produced so many top-flight athletes can so easily let down the athletes of the future.
	We need politicians on both sides of the House to take the time to understand sport in depth. Soundbites are simply not enough. We need politicians and administrators to understand the competitiveness and administration of the modern international sporting industry. Noble Lords on all sides of the House will agree that gold medal athletes need gold medal administration. Let us hope that on all sides of the House we have learnt the lessons and are ready to deliver.

Lord Faulkner of Worcester: My Lords, it is an immense privilege and pleasure for me to follow the noble Lord, Lord Coe. He and I first met when we served together on the Sports Council in the late 1980s. He was already by then a sporting superstar—an icon for young British athletes. He had won the BBC "Sports Personality of the Year" award in 1979 and had been elected the sports writers' "Sportsman of the Year" four times.
	There is not time for me this evening to cover all of his achievements on the running track. However, what sticks most in the memory were his 1,500 metre gold medals in the 1980 Moscow and 1984 Los Angeles Olympics, his silver medals for the 800 metres in both games and the succession of world records that he held between 1979 and 1981—for 1,500, 800 and 1,000 metres and for the world one mile record. In six astonishing weeks in the summer of 1979, he broke three world records—two of them at the Bislett Stadium in Oslo. For that, the Norwegians awarded him the Bislett medal and, according to their people at the embassy, accorded him something approaching god-like status in that country. Never has there been a Member of your Lordships' House who has run faster than he, not even when running late for a Division.
	Since he retired from professional athletics, the noble Lord has had two further successful careers—as a businessman and as a politician and public servant. I referred a moment ago to his time on the Sports Council; he was also a member of the Health Education Authority for five years. He was elected to the other place in 1992 for Falmouth and Camborne, served three Ministers as their Parliamentary Private Secretary and became a government Whip in 1996. After the 1997 election he was private secretary to William Hague, and his judo partner. Honours and recognition continued—deservedly—to come his way. That is summed up in the sports writers' award in 1998 for the:
	"Most outstanding contribution to sport in the last 50 years".
	We are very lucky to have him in this House. Having heard a maiden speech from him of such quality and perception, we all look forward to hearing from him again on many future occasions.
	We are indebted to the noble Lord, Lord Glentoran, for asking this Unstarred Question. As the noble Lord, Lord Coe, reminded us, the noble Lord, Lord Glentoran, himself has a very distinguished sporting record. He is allowing us to look at one of the most difficult areas within the remit of the Department for Culture, Media and Sport. It would be untrue to say that the handling of the Wembley and Picketts Lock saga has been an unqualified success, and I fear that none of the parties or individuals concerned emerges with their reputations unblemished. I have attempted to make some sense of the various reports and public announcements surrounding these issues. It seems that there will never be agreement between the various dramatis personae on what went on.
	One inescapable fact is that most of the people who were in positions of responsibility at the beginning are not there now. Mr Ken Bates is no longer chairman of the national stadium company; Mr Derek Casey has left his job as chief executive of Sport England; Mr Bob Stubbs resigned as chief executive of Wembley National Stadium Limited; Mr Tony Banks MP left office as Minister for Sport half way through the saga. And the entire DCMS ministerial team departed immediately after the general election in June.
	All the former Ministers with responsibility for sport spoke in a fascinating debate in the other place last week, to which the noble Lord, Lord Glentoran, referred. That debate was on the report by the Select Committee on Culture, Media and Sport on Picketts Lock and the world athletics championships. That report is famous for its adjectives, which include "bizarre", "inept", "cavalier" and "scandalous".
	I guess that tomorrow's expected decision to confirm the rebuilding of Wembley as the national stadium will close the debate on whether athletics and football can co-exist in a new national stadium. I assume that Sport England will not have to wait any longer for the return of the £20 million out of the £120 million that was granted to the Football Association. I might add that my understanding of the original deal was that the three sports—football, rugby and athletics—would co-exist in the national stadium. Since one of the three partners now appears likely to be excluded, it seems odd that the amount to be returned is not one third of the public funding but only one sixth. I just wonder how much football, which is our country's richest sport by miles, would have received from Sport England if it had said at the outset that it was going to build a stadium that made no provision for athletics.
	An important lesson that we should learn from all of that is that we would be better advised, certainly in the short term, to look at ways in which we can improve assistance to individual athletes and to increase sports provision generally, rather than spend all of our resources on big and unrealistic projects and on bids for events that we are unlikely to bring to this country. Here, I am afraid, I part company with the noble Lord, Lord Coe, because I include in that the Olympic Games and the football World Cup Finals.
	In that context, I applaud the efforts of the current Minister for Sport, Richard Caborn, who has set himself the target of investing in grass-roots sport, increasing participation in schools by young people and ensuring lifelong participation by adults. In the debate in the other place last week, he said that he also wanted,
	"to place emphasis on the need to improve coaching and talent identification, to refurbish community facilities, to ensure that there is adequate maintenance of existing facilities, and to provide better support for our top athletes".—[Official Report, Commons, 11/12/01; col. 773.]
	Imagine, my Lords, that you are a 12 year-old child who is watching the Olympics on television. You show great promise as an athlete, and you say to yourself, "I want to become the next Jonathan Edwards, or Denise Lewis". But at school your facilities are only average. Sports are part of the curriculum but there is no specialist teaching for a child like you with a bit of talent. The local athletics club seems to spend all of its time fundraising just to buy basic equipment and to keep the club going. If a national athletics stadium costing £100 million is built you might one day get to visit it but, unless we invest in nurturing your talent, you certainly will not be performing in it in a few years' time. With our poor record of staging international events, you are unlikely even to be a spectator at a world athletic games.
	The truth is that there is no point in having a modern, well-equipped national athletics stadium if children at local schools have no opportunities to do well at track and field events. Most schools do not have a decent running track or field. Many sports pitches are in a terrible state of repair, often because no full-time groundsman is employed to look after the pitch or track, whose condition therefore deteriorates. So they become unsafe and unusable. Changing room facilities are often awful.
	Other countries do better and invest in athletics at grass-roots level, as my noble friend Lady Billingham said. In France virtually every small town and large village has a stade municipale, which offers a running track, a football pitch and a modern changing pavilion. The New Opportunities Fund, which is chaired with such distinction by my noble friend Lady Pitkeathley, is investing £581 million in England in physical education and school sport. There is also a huge expansion in the school sport co-ordinator programme, particularly at primary school level. Those two initiatives will, I hope, make a huge difference. But we have a very long way to go.
	By contrast, one thing that we seem to be getting right is our support for top athletes. UK Sport is in the lead in terms of providing lottery funding for the world class performance programme—it is giving almost £2 million a year for four years. Eighty athletes are named as part of the world class performance programme—27 athletes are on Commonwealth Games packages for England and 140 athletes are on the world class potential programme, which is supported by Sport England.
	That approach builds on the pioneering work of the Foundation for Sport and the Arts carried out in the first half of the 1990s. I declare an interest in that I am now a trustee of that body, as are my noble friend Lord Attenborough and the noble Lord, Lord Brabazon of Tara. In those days, the foundation had the money to make 4,250 grants to individual athletes, totalling £3.6 million. Then, recipients included Steven Redgrave and Matthew Pinsent.
	The difference made by the funding of athletes has been immense. In the past, a budding athlete had to combine a job with training. That meant not only getting up at the crack of dawn to train before work and for hours after work and at weekends; young athletes also had to depend upon the generosity of employers and supporters to help to raise the funds for their training.
	That has changed, and the investment in athletes has already paid dividends. In the Sydney Olympics, Britain won 28 medals—11 of them gold—which made it the most successful games since Antwerp in 1920. Therefore, the lesson is: concentrate on the grass roots and the individual athletes and do not be obsessed and side-tracked by the big, unrealistic and grandiose projects.

Lord Monro of Langholm: My Lords, we are all deeply indebted to my noble friend Lord Glentoran for initiating this debate today and for telling us the facts so clearly. I congratulate my noble friend Lord Coe on a brilliant maiden speech. This House is often derided for being out of date, and so on. But I doubt whether many legislatures in the world can produce in one debate two speeches from Olympic gold medallists sitting on the same Bench. That certainly cannot be equalled down the corridor in another place .
	I declare various interests. I was Minister for Sport and the Minister with responsibility for sport in Scotland, and for five years was shadow Minister for Sport opposite Dennis Howell. He and I got on extremely well together and often discussed many of the appointments to the Sports Council and the detail of other policies before he made them. I believe that that is a policy that has rather disappeared in recent years. I have also been president of the three governing bodies of rugby football, motorcycling and shooting, and a member of the BOA and the CCPR.
	I am afraid that I want to talk more controversially about the sorry story of incompetence and muddle concerning Wembley and other fiascos. Last week we had a Question on the subject of school playing fields. The matters raised took us a long way from the manifesto of the Labour Party in 1997. The tax exemption policy promoted by the Treasury last month has caused a shock wave through the CCPR and the National Playing Fields Association. I heard Sir Steven Redgrave say that, too. That is not what people wanted. They did not want a complicated tax exemption policy. They wanted something more along the lines of a mandatory rate relief, as applies to charities. That is certainly the most disappointing step to have been taken by the present Government.
	Of course, people are highly critical, too, of the percentage loss of lottery money, referred to by the noble Lord, Lord Glentoran. They are critical not only of the total but because a percentage of the total has been taken away from sport and given to the New Opportunities Fund. That fund contributes to all sorts of things. But the Government should be making those contributions and not taking money from the lottery. Fortunately, this week the Government appear to have recovered their poise, but they had been dragging their feet seriously over the British Grand Prix in relation to the infrastructure at Silverstone.
	But the main interest in the debate this evening is athletics and stadiums. The Government seem to have lost their way and caused turmoil, which I fear will take years to put right. I certainly do not need to repeat the withering criticisms of the Select Committee or of many Members of Parliament in the debate that took place last week in the House of Commons.
	As noble Lords have said, we did well in the last Olympics. Great credit should be given to the British Olympic Association, UK Athletics and the governing bodies of the individual sports—sailing, rowing, cycling, equestrianism, and so on. All those sports did exceptionally well. Indeed, in recent years this country has done well in world sports. The sporting bodies certainly have not deserved the slap in the face that they have received from the Government over the past year or two.
	It is sad to reflect on the loss of our world influence in sport and sports bodies. I refer to Sir Stanley Rous, Lord Exeter, Lord Killanin, who was Irish but was very much in the British Isles context. It will be a long haul to regain the prestige that we had in world governing bodies. The Government must do their share to help through diplomacy and social activities. We must give cocktail parties to visiting sports officials in order to make them feel wanted in this country. In time, they will elect some of our members to the major governing positions.
	In October the Government gave their response to the White Paper, Staging International Sporting Events. I must say that it was very disappointing. Throughout their response to the Select Committee they seem to find a difficulty for every solution and do not show much enthusiasm. That point was made by my noble friend Lord Coe and, indeed, by the noble Lord, Lord Faulkner. We must have a focus to bring world events to this country. If we do not make an effort to do so, the reward that we reap will be very disappointing.
	We must take a risk, as Sydney did. One has only to look at how the success there reverberated throughout Australia, both in terms of prestige and financially. We must be prepared to look ahead as the Australian Government did and to help ourselves rather more than we are doing at present. We should not concentrate always on cost-effectiveness, value for money or nit-picking over the last dollar.
	I turn to matters of wishful thinking and nostalgia. My noble friend Lord Higgins will well remember the great days of the White City, when Bannister, Chataway, Kuts and Zatopek hurtled round on an old cinder track but drew enormous crowds. That is something we no longer have. We must try to bring those crowds back to athletics, while bearing in mind that television was in a far more infantile state in those days than it is today.
	However, we have a basic problem in that a 400-metre running track cannot go round the outside of a full-sized football or rugby ground. That would cause immense problems inside a stadium. If an eight track and another track or a jumping pit is built around a pitch, the spectators will be too far away from the football action. Therefore, it is almost impossible to have a good football stadium and a good athletics stadium at one and the same time. I remember that when the Commonwealth Games came to Scotland, we asked whether we should try to put a running track inside Murrayfield instead of building, as we did eventually, Meadowbank. But it involved digging out half the terracing and a great deal of the seating around the stand and making a mess of one of the finest rugby grounds in the world.
	I now turn to what the Government tried to do. They hatched the Wembley plan together with the athletics configuration for the World Championships for 2005, which had been promised. But taking the athletics aspect into account would have cut the number of spectators to 67,000. That would have been insufficient for an Olympic bid, which needs 80,000 or more spectators. Therefore, the Wembley proposal was finally scrapped. In passing, many of us asked why the event needed to take place at Wembley. Why do we not continue the idea of going round the major, impressive football grounds throughout the United Kingdom, which will be enhanced in a few years by new grounds at Arsenal and Liverpool? Despite all the handicaps, the Government tried to press on with a £650 million project, which would have covered the infrastructure as well.
	I want to raise a point which was referred to also by the noble Lord, Lord Faulkner. I cannot understand how Sport England allowed £120 million to go to the FA at an early stage before any final decisions were made. I say that that money should be repaid in full by the FA to Sport England so that it can be regenerated into sport generally. After all, football seems to be a very wealthy sport—one has only to look at the transfer fees and at the weekly salaries of the many great players. One wonders why football cannot pay for its own stadium if it is determined to have one.
	When all that fell through the Government set course for Picketts Lock. We know how impractical that turned out to be. That then fell through and with it went our application for the World Games in 2005. As the noble Lord, Lord Coe, said, it was naive of the Government to suggest to the president of the IAAF that we should transfer our application from Picketts Lock to Sheffield. That was the height of indiscretion and highlighted the lack of understanding of international procedures in the world of athletics. The episode of Wembley, Picketts Lock and all the other options put forward by the Government was disgraceful.
	We do not know what the statement by the Football Association will say tomorrow, nor do we know what the future holds for athletics in the world situation. We have Tyne stadium, Meadowbank, Gateshead, Manchester, Birmingham, Crystal Palace, Sheffield, Antrim and others, but none of those is big enough to take world or Olympic competitions. We have to find a way to enable those competitions to come to this country. To have international competitions in this country means so much to our young people. They follow the success of international competitions, which is to be encouraged . If we do nothing else in this debate, we must encourage the Government to put their house in order and to make the correct decisions to forward the interests of the youth of this country.

Lord Addington: My Lords, this is an interesting and timely debate. I congratulate the noble Lord, Lord Faulkner, on undertaking a job that I did not want at any price. When I heard that the noble Lord, Lord Coe, was to make his maiden speech today, I did not want to have to sum up his achievements in athletics in a debate on the subject.
	This debate has been overshadowed by the disaster of the national stadium, whether at Wembley or Picketts Lock. After everything went wrong all those involved are still pulling out the splinters. It will colour the debate on sport far into the future.
	The noble Lord, Lord Faulkner, said that we should concentrate more on grass roots and talent development. He is right, but he missed one point. For sport to be successful one important component is necessary: sport has to be fashionably acceptable. Generally that is achieved in any sport by exposure and by success. If that is not present, the interest is not built up and people do not become involved. We often overlook that. Even in our sporting culture, we have had upturns and downturns in our major sport, football.
	For a brief period England's Rugby Union team, conquering all before it, made rugby a fashionable sport. Unfortunately, due to arcane laws, Rugby Union was forced to open up rather than staying a strictly amateur game, the money boys came in and they nearly destroyed large sections of it. Suddenly the sport stopped being fashionable because the success dried up.
	Success and the culture around sport is vital. That is probably the best argument that I can think of for holding a major championship. The Commonwealth Games, in which all sports come together, is a wonderful event and will give us some of the glamour and success, but it does not have the bite of the World Athletics Championships, the Olympics or the soccer World Cup. Those big events are required to keep the interest and the focus alive, so that children will say, "I want to do that". That is why such events are so important.
	Dozens of other spin-offs are involved. Big events bring an immediate boost to tourism and the economy. I totally agree that we have to fund amateur clubs properly to ensure that people can take part in sport at some form of competitive level or as recreational pursuits. If patterns and habits are established, we can ensure that we cut down on our health bill.
	We have pumped large sums of money into the National Health Service, but we do not appear to take on board the idea that many diseases from which we suffer are caused by our sedentary lifestyle. We also are paranoid about children walking anywhere, and to do so probably is not much more dangerous than it was in the past. People refer to children adopting a "Gameboy culture" rather than running around outside. Making sport fashionable and providing good coaching will help the health bill and benefits will be reaped in terms of a healthier society with less loss of production. For that reason it is important to have an overview.
	I feel that we have wasted one of the greatest opportunities in terms of sports funding that we shall ever have. The slices of the cake from the National Lottery have become smaller due to the New Opportunities Fund. Initially we were told that some things would not be paid for out of the New Opportunities Fund. As everybody predicted, a smaller amount of money is being received from the National Lottery. It was almost inevitable that that would happen.
	I now turn to the expensive part of funding sport, ensuring that things are run properly and coaching. It is difficult to raise funds for matters of that kind. Building a stadium or a new facility is comparatively easy; running one is the difficult part. That was made clear in the old Soviet Union. That country could always build structures, but could not repair them.
	We shall have to look closely at whether sport and other good causes can live together in the New Opportunities Fund or whether something will happen to push the matter back into government funding. It does not matter which ones go where as long as they receive the resources required.
	This is an important period in sport. Sport has to be taken seriously and the vision and the will to see through the mission are necessary. At the moment we are saying, "Let's do everything", and in the end we have changed our minds and failed. Unless we have an overall vision that takes into account the whole economy and the way in which we live, and unless we bring in joined-up government, we shall continue to miss the target because there will always be a new fashion icon.

Baroness Anelay of St Johns: My Lords, I thank my noble friend Lord Glentoran for giving us the opportunity to consider how to ensure that athletics has a healthy future as a sport in the United Kingdom. As noble Lords have pointed out, it is important that we should enable young people to have the opportunity to develop excellence in athletics. It is also important that we make it possible for those of us who will never be a Seb Coe to develop our skills as far as possible and to enjoy doing so.
	I was privileged to be present to hear my noble friend's maiden speech. He reminded us that athletics has given us some memorable moments in British sport. I certainly remember him taking part in some; I never thought that I would be a colleague of his, which is certainly a pleasure.
	Hosting international events can raise the United Kingdom's sports profile internationally and raise the profile of a particular sport within the UK. The World Athletics Championships is the third most important international sporting event after the Olympics and the World Cup. Hosting it raises our international sporting profile. Vitally, as pointed out by noble Lords today, it has an important impact on the thousands of young people who see an event taking place in their country and are then inspired to take part in that sport, and perhaps to develop their skills to the full.
	A home venue also gives athletes a competitive advantage. The World Athletics Championships would have brought significant benefits to our sports people. But we have lost any chance of that with the Government's meddling in and mishandling of the issue of where the 2005 championships should be held.
	As noble Lords have mentioned, the Culture, Media and Sport Select Committee of another place recently published an excoriating report which details its catalogue of evidence of the Government's culpability in the story of the Picketts Lock fiasco. As my noble friend Lord Monro pointed out, the report describes how a national athletics centre at Picketts Lock was plucked out of the air by the Government and then abruptly dropped. It describes how the Government got involved beyond their scope and powers in conjuring up a project that the Select Committee judged to be unviable from the start.
	In July 1999 the right honourable Chris Smith launched the Wembley project saying that the new stadium,
	"will be a magnificent venue for athletics as well as for football".
	Yet just a few months later he told Parliament that the venue was a dud. It was no good as a basis for an Olympics bid and,
	"it seems unlikely that it could provide an appropriate venue for the world athletics championship".—[Official Report, Commons, 1/12/99; col. 306.]
	It was at that stage that the Government decided to remove athletics from Wembley and find another venue. The Select Committee concluded at paragraph 23 that,
	"the initial decision to remove athletics from Wembley was beyond the proper responsibilities of the then Secretary of State and was taken in a hurry on flimsy and subjective grounds".
	The report added that the national stadium concept was developed precisely to solve the problem that an athletics-only stadium for the largest of the events would be economically unsustainable. To abandon that solution precipitately and propose in its place an athletics-only stadium was therefore, it said, perverse. To abandon athletics at Wembley on the grounds of its possible unsuitability for an embryonic Olympic bid, and then to substitute efforts to build an athletics-only stadium which was, by design, not suitable as a main Olympic venue, can only be described as—the noble Lord, Lord Faulkner, referred to this earlier—bizarre. That was one of the interesting adjectives used by the committee in its report.
	By the time that the IAAF council had accepted London's bid, Picketts Lock had been identified as the venue for the championship. The IAAF only accepted the UK bid on the condition that UK Athletics could demonstrate that clear progress had been made on the stadium by October of this year. Ministerial confidence in the project continued unabated, even though the problems of Picketts Lock grew daily.
	Indeed in the committee's third report, an earlier report to the one mentioned by noble Lords, published on 30th March, highlighted the problems that had beset Picketts Lock: a shortfall in the assembled capital funding; the lack of an underwriter for the event; a question mark over the quality of the stadium and its long-term sustainability; transport and infrastructure issues—bad 30 to 40 years ago, as I know having grown up in the area, let alone now; and a short timetable because the plug had been pulled on athletics at Wembley.
	But the Government's manifesto this year was still clear. It stated:
	"We will maintain the elite funding we put in place for individual athletics with a first-class athletics stadium for the World Athletics Championships in 2005".
	But the first act of the Prime Minister after the election was to sack his existing ministerial team at CMS. The new Secretary of State commissioned Patrick Carter to look at the problems of Wembley and of Picketts Lock.
	The Government finally woke up to the problem at Picketts Lock. It was a project in terminal difficulty. They pulled the plug on it and tried to shuffle the world championships off to Sheffield. The Government's last ditch attempt to divert attention away from their meddling in the whole issue simply set up Sheffield to be knocked back by the IAAF. It quite rightly said that it could not simply shift such championships without reopening bidding. It at least had to follow proper procedures.
	So today we have no Wembley, no Picketts Lock, no Sheffield and no 2005 World Championships in the UK. The effects of the U-turn by Ministers are far-reaching. The International Olympic Committee president said:
	"Of course the Picketts Lock situation was a very serious one. A country not being able to fulfil its pledge to host a major competition is not a trivial matter".
	It is a mess. How do we get out of it for the future good of athletics and the athletes in this country? There are urgent questions that the Government should address. Are they seriously considering the recommendation, at paragraph 67 of the report, of whether there is a last opportunity to return to the original strategy of a national stadium at Wembley for football, rugby and major athletics events? As the report points out, without that it seems clear that there will be no suitable venue for athletics in London capable of staging the world championships or the Olympics and therefore little prospect of attracting these events to the capital for the foreseeable future. My noble friend Lord Monro carefully described how difficult it is to combine athletics and football in the same stadium. It is a problem to which I assume the Government will want us to return tomorrow, but I hope that the Minister will give some response on these issues with regard to athletics today.
	Do the Government accept that they must state clearly whether or not they want the UK to be a host for the larger sporting events as a facet of their wider sports policy, including the encouragement of grassroots participation, and as an element of the way that the UK is perceived internationally? How will the Government respond to the plea by UK Sport for a co-ordinated world-class facility strategy for the whole of the UK to underpin any bids for international events?
	I noticed that the Secretary of State announced a review on 23rd October by the Performance and Innovation Unit within the Cabinet Office of the policy in relation to the bidding for and staging of major events. What is the timetable for that? Some while ago I tabled a Written Question with regard to this matter. I am still awaiting an Answer. It may be that the noble Lord will give me a pleasant surprise today and be able to provide it.
	Do the Government accept that they must now establish a proper relationship between the managing body that bears the responsibility for delivering sporting projects and a government which should be an enabler. They should enable and help the project to deliver without interfering in the way that they have done so far. My noble friends Lord Glentoran and Lord Monro clearly pointed out how important it is for a government to assist and to support organisations deliver sporting events but not to interfere in them.
	Whatever the Minister's response today, it is clear that we have lost the World Athletics Championships. That is a terrible blow. However, it is important now that we move forward; the Government must work with Sport England and all the athletics bodies throughout the UK to ensure that there is a positive legacy for athletics. Our athletes need it and they certainly deserve it.

Lord Davies of Oldham: My Lords, I begin by thanking the noble Lord, Lord Glentoran, for introducing the debate. It has been well informed with some outstanding contributions, but also it has reflected the deep interest, indeed passion, of those who participate in sport.
	Not all of us in the House can boast of the outstanding achievements of the noble Lord, Lord Coe, who has taken this occasion to make his maiden speech. But he communicated effectively just how much athletics has meant not just to him but, as he has discerned it, to the nation. All of us who have participated in the debate today have also in our own less distinguished ways sought to reflect the commitment to sport and, as the noble Lord, Lord Addington, emphasised, to the question of sport for its own sake but also for the health of the nation. We all recognise the valuable role that sport has to play in that.
	Let me begin by emphasising that the Government do not have policies for individual sports, but we have published a detailed strategy for developing sport as a whole in this country. How those policies are best applied to individual sports is a matter for the sports councils working in partnership with the governing bodies of the sports concerned.
	The Government seek to provide an environment in which sport can thrive and, through the sports councils, to offer leadership and co-ordination to an important, but diverse and fragmented, field of activity. I may add to the noble Lord, Lord Glentoran, that we intend—it is in our published expenditure plans—to increase expenditure on sport from £66 million to £103 million in 2003. Our policy is backed up by Government resources, as well as funds available from the National Lottery.
	As has been emphasised this evening, athletics is one of our major sports. The noble Lord, Lord Coe, said—with a slight air of regret—that athletics has never been our foremost national sport and paid tribute to football in that role. However, in recent surveys, achievement in international athletics ranks second only to achievement in football, so we are discussing a sport of major concern to the nation. Therefore, the Government greatly regret the circumstances arising from our withdrawal from the 2005 World Athletics Championships bid. Those circumstances have been explored in the House today, in numerous parliamentary questions, and in Select Committee and debates in the other place.
	The Government recognise that we have a significant obligation to the development of athletics. Let us derive good from misfortune. The loss of the athletics championship through the failures regarding the stadiums is to be regretted. Nevertheless, it releases funds for us to cherish and develop opportunities for athletics. Several noble Lords have said that the Government need to pay attention to that and the appropriate bodies.
	The money that would have been spent on Picketts Lock is now available to spend on sport in schools. Several noble Lords have mentioned the tremendous importance of improving our schools' facilities. My noble friends Lady Billington and Lord Faulkner emphasised how much they welcome the attention being given to improving facilities for school sport. That is costly; the Government are committed to a considerable expansion in schools' sports facilities, some of which is made possible by funds that would have been used elsewhere.
	The noble Lord, Lord Coe, also emphasised the crucial role of sporting clubs. We all glory in our athletics and sports clubs. After all, they are the basis of a great deal of volunteer support in the community and develop our subsequent high-level talent. Of course they need support. In reply to the penetrating speech, drawing on substantial experience from his previous role as Minister for Sport, made by the noble Lord, Lord Monro, of course the Government are considering how to support sports clubs.
	I emphasise that the Government's mind is not made up on how best to afford that. My right honourable friend the Chancellor has signalled his intention to provide support, and it is for sports bodies to explain to the Government how they think that that can best be effected. It has been recognised by the Government at a high level that support for sports clubs is necessary and that the interface between school sporting opportunities and clubs is of colossal importance.
	It is still to be regretted that not only are many of our young people leaving school and other educational facilities far too early, but far too many of them have their last sporting experience at school and do not take up such opportunities thereafter. It is our task in the wider society to ensure that facilities are available for that to occur.
	That is not just to provide the great achievers of the future, but it is important for us to recognise sporting excellence at the highest level. That is why resources to develop elite competitors is of great importance. Lottery funded programmes are investing more than £40 million a year in elite sport through the World Class Performance programmes run by UK Sport and Sport England. They target funds at top sportsmen and women—as my noble friend Lord Faulkner said. That provision is there to ensure that we achieve excellence at the highest level and recognise the inspiration given to our nation by high-level achievement.
	I think that every Member of the House has reflected with gratitude on all those who have hit the highest level in athletics and thrilled the nation in the past. We pay tribute to the noble Lord, Lord Coe, and others for their achievements. There is no doubt that inspiration from such achievements has a significant impact on sport.
	I am a little more reserved on the question of whether hosting great sporting events in the country necessarily brings an automatic spin-off in sporting achievement—or even sporting enthusiasm—among the young and older people in the country. I am conscious of the fact that the world's greatest lawn tennis tournament has taken place in this country for many years. I share with so many others our deep disappointment that that is not reflected in tennis achievement at the highest level, and has not been since the days of Fred Perry. So we should not think that great events and occasions produce such a spin-off, but there is no doubt that it would be remiss of me not to say that there is regret in government that the Wembley Stadium and Picketts Lock projects foundered.
	The analysis of the Wembley Stadium project given by the noble Lord, Lord Monro, was entirely fair. There is a real difficulty in the present day and age with combining the requirements of modern football and the expectations of spectators at modern football events with an athletics stadium. The attempt at Wembley Stadium to solve that problem was unsuccessful. I entirely reject the idea that the Government could just have stood back from a project to which so much public money of one kind or another had been committed. But of course, the then Secretary of State did not take a unilateral action, he was involved in deep consultation with the bodies concerned on the feasibility of the project.
	That led to the attempt to develop Picketts Lock. That stadium foundered not on the construction of the stadium but on the provision of support facilities—especially accommodation for athletes—in the time available. All noble Lords must recognise that we could not have provided a first-rate opportunity for international athletes if almost an hour of every day on which they sought to compete had been consumed in travel to the arena because of the inadequacy of accommodation around Picketts Lock.
	That has released significant sums of money to be invested in school sport and sports clubs and to provide government support in increasing the opportunities for athletic prowess. I have no doubt that all those aspects take a considerable time before producing results. We all recognise that top athletic achievement is not produced overnight but is the product of considerable support over a number of years.
	In once again thanking the noble Lord, Lord Glentoran, for introducing the debate, I want to emphasise that despite the many charges which have been made against the Government, they are firmly committed to enhancing the opportunities for athletics. The resources now available as a result of their release from the national stadium project can be devoted towards increasing athletic opportunities at grass roots and I have no doubt that the country will benefit from that development.

Flood Defences

Lord Renton of Mount Harry: rose to ask Her Majesty's Government what measures they are taking for long-term defences against floods, including the restriction on the building of new houses on flood plains.
	My Lords, I decided to raise the subject of flood defences and building on coastal plains as a result of visiting a doctor's surgery in Lewes a month or two ago and picking up a pamphlet informing residents where to obtain sandbags, how long they had before receiving a warning call and where they were to go in the event of another flood. I came to the conclusion that it was time we moved on from what the Norwich Union has called "the sandbag culture" of inadequate defences and poor planning to a more rational and, I accept, more expensive approach to flood defences.
	I shall speak primarily about Lewes and Sussex. I hope that your Lordships will forgive me but that is the part of the world I know best. I realise that other noble Lords will speak about other parts of the country which have experienced the same problems. My wife and I are lucky because we live halfway up the hill outside Lewes and were not affected. Other people we know well were. It is worth remembering that during 24 hours on 11th and 12th October 2000, 134 millimetres of rain fell and there was a two-hour flood warning. As a result, 600 homes were dispossessed and 200 businesses evacuated. Some people have not returned to their premises either because there was too much damage, because they cannot afford the insurance or because sewage was in the floodwater and there is still a health and safety risk. That problem is faced by people in the neighbouring towns of Uckfield and Robertsbridge.
	I have great respect for the work being done by the Environment Agency. It is examining a number of plans for Lewes which involve options such as upstream storage, new dams, altering the course of the river and even evacuating houses in the lower part of the town. However, the agency hopes to do that in a shorter time than usual. Its last big project in West Sussex was in Chichester where it moved the River Lavant sideways. That took seven years. The view is that the project in Lewes would take at least five years and that it is not a capital spending priority.
	That brings me to the position of East Sussex County Council. It has a 5.7 per cent increase in this year's standard spending assessment for flood defence. But that has to be set against an increase of 10.5 per cent in the precept for the Environment Agency for flood defences and proposed increases of 14 per cent next year. The flood defence committee which met two or three nights ago—it comprises East Sussex, West Sussex and Brighton and Hove— decided that it could afford only 9 per cent. Therefore, despite all the difficulties, dangers and worries, there will be underspending on capital assets which need restoring because the local authority cannot afford to take the money out of its current short-term spending. Where assets are rebuilt or restored, that will probably be done to an inadequate standard.
	I wish to put two or three specific recommendations to the Minister, the noble Lord, Lord Whitty. First, I know that there has recently been a review of the Bellwin rules, but I suspect that the issue of capital spending is still not adequately covered. The Bellwin rules need reviewing to see how local authorities should be helped more in relation to necessary capital spending which arises out of emergency or disaster.
	The Environment Agency needs to interfere more at the local planning level. I see no reason why, when it gives a flood direction to a local planning authority but that authority ignores it, stating that it will none the less go ahead and build on the land which the agency sees as unsuitable, it should not have the ability to appeal directly to the Secretary of State for the decision to be reconsidered. PPG25 is certainly a step forward: it is well-intentioned and it has greatly strengthened the hand of local authorities. However, it has been suggested to me that it should be made retrospective. It is argued that where developers already have outline planning but have not proceeded they should fall under PPG25.
	One of the most depressing and frightening statistics in all the material sent to me when it became known that this debate was taking place is that in the year 2000-01 year 27 per cent of planning applications by value were on coastal plains. In the light of what has happened in the past year or two, that figure is incredible.
	As regards individual people, there is a problem of insurance. We know that the Norwich Union and other insurers have stated that they will continue to cover people until the end of 2002, but two difficulties arise out of that. First, as some local businesses pointed out to me, the cover has remained but the excess has risen from £100 to £2,500. In the case of one small shop in our town, if it were flooded it would have to pay the first £20,000 and that would put it out of business.
	Furthermore, as some who have returned to their houses have said to me, "It is all very well our having insurance cover but if we want to sell we can't. A buyer will not get a mortgage without insurance cover and the insurance companies will not give cover to a new owner entering a previously flooded house". I cannot believe that in this day and age those problems are tolerable.
	I turn from the consequences to the causes. West Sussex is an extraordinary example of difficulties which arise in respect of land use. Thirty-six per cent of the land will be in the new national park where maximum building protection is given. At the same time, West Sussex has been told that it must build 46,500 new homes during the next 15 years, far more than the county council wants to build, and that 60 per cent of that development must be on previously used land. Of course, in Sussex so much of the previously used land is around Lewes, Uckfield, Chichester, Arundel and Newhaven, it predates the planning system and it is all on the flood plains. One therefore has a paradox of three contradictory objectives which need to be examined. I suggest closer examination of land availability and suitability to meet housing targets.
	One cause of the problem in the South Downs is without doubt the effect of intensive agriculture, especially as a result of the sowing of winter cereals. They are often sown on steep slopes which are unsuitable for such crops. The ploughing and winter sowing lead to soil erosion and the rainwater then carries silt and debris down the hills. Small gullies turn into big ones and in October and November in particular, the rainy season, the water floods off the hills on to the flood plains and into the towns. It is essential to have new environmentally sensitive agreements which leave the land fallow during winter and encourage farmers to leave the autumn stubble. That will revert to grass or remain as stubble so that the land continues to act as a sponge, a moisture absorber, rather than what has been described as "sponges turned into draining boards" allowing the water to run off the hard compacted land on the hills that has been sown and down on to the flood plains.
	Finally, I turn to the most difficult point of all; that is, how to predict whether the rainfall of the past year was a freak or whether it will occur more frequently in the coming century. It seems to be commonly accepted that floods are now occurring about twice as frequently as they used to and that climate change will bring more rain. Some have even forecast that flooding will take place as much as 10 times more frequently in the century ahead. I believe that we have to consider the matter on that basis. It will cost money, but it is necessary to spend that money, as it is necessary to spend money on the NHS. It will have to come out of taxes.
	Equally, this is not only a question of defences. We have to go back to the sources and consider building on flood plains, look at the effect of agriculture and winter cereals and evaluate how, in tackling those problems, we can try to turn nature to our advantage, as we have done with wind power, rather than simply to react in fear and terror. I often wonder how many times Shem, Ham and Japheth told Noah to build his Ark before he actually did so.
	However, when one has to deal with such a diverse bunch of people, as I have had to do over the past week—the Environment Agency, the Association of British Insurers, the Royal Society for the Protection of Birds, chartered surveyors and engineers—and finds that they are all singing the same song saying, "Beware of the real dangers ahead", then that is a song worth listening to and one that any government should take very seriously indeed.

Lord Hunt of Chesterton: My Lords, we are grateful to the noble Lord, Lord Renton of Mount Harry, for tabling the Question on flooding, which is probably the greatest disturbance facing British communities at the present time. Around 10,000 properties were flooded during autumn 2000 at an estimated cost of £1 billion. But more than a quarter of a million properties were at risk and were protected by various measures. No other physical danger even comes close in its magnitude.
	Fortunately, in this country those dangers can be considered only as disturbances causing great inconvenience and cost, but with little loss of life. However, in other parts of the world floods are fatal and each year many thousands of people die as a result of tropical storms and cyclones hitting vulnerable communities on the coasts of America and Asia. However, as I shall explain briefly, technology and science are making many contributions to the reduction of flooding, or at least to reducing its impact on communities. Those advances involve all areas of science, including agriculture, as was pointed out by the noble Lord, Lord Renton.
	A well-attended meeting was organised recently by the Royal Society and the Royal Academy of Engineering. I learned about some of the latest developments and looked at the future prospects. In November an excellent document funded by the Department for Environment, Food and Rural Affairs and drawn up by the Institution of Civil Engineers entitled "Learning to live with rivers" was published.
	I should like to make two points. First, the forecasting of floods is improving both in accuracy and in the length of warning given. Warnings depend on forecasts of rainfall and how the rain drains into rivers, requiring a combination of meteorology and hydrology. Whereas well-publicised targets and performance indicators are set for weather forecasts—they have to improve by a few percentage points each year and steadily extend the accuracy of longer-term forecasting; that is set out in the annual report of the Met Office—such specific and technical targets are not available in the case of forecasting river flooding, either in the UK or in any other leading country.
	However, evidence suggests that warnings are improving, in particular as regards reaching more people in a timely fashion. I should add that the freedom of information approach taken last year enabled far more information about the risk of flooding to reach the people who needed it. I hope that the Government will press the Environment Agency and the United Nations agency responsible for the prevention of flooding—the World Meteorological Organisation—to move further in this direction. It will certainly help the public to gauge the reliability of flood warnings, as well as to act responsibly once they have been issued. The BBC, the Met Office and the Environment Agency are to be congratulated on the effectiveness of the short-term flood warnings that were issued in the media.
	However, the report from the Institution of Civil Engineers recommends one important change in regard to public information on flooding; that is, to abandon the practice of describing floods in terms of their "return period". A one in 100 chance is far more understandable, in particular to a gambling British public, than a 100-year return period. We all know that one or two lucky or unlucky events can occur one after the other. It is the same with floods.
	The second point I wish to make is in part reflected in the ICE report. The practices of assessing the risk of flooding and the forecasting of particular events by engineers and government organisations are not as advanced as they should be, given the scientific and technological progress made and the considerable investment that has taken place. It is a stimulating experience to be subjected to a Public Accounts Committee inquiry—as I have learnt myself. It makes one conscious of the need for public investment to be used effectively. In the UK, Europe and the United States it has long been noted that despite the huge investments made in weather radar—at £1 million to £2 million each— and in satellites to measure clouds, precipitation and river levels, their data have not been fully utilised or have not been utilised in the same way in different parts of the country. Sometimes they have been ignored by those responsible for gathering flood statistics and producing forecasts. Just as meteorology has improved through a combination of better observation and more powerful computer calculation, such developments are now imperative for the study of river levels. The investment that was made 30 years ago in meteorology—with the remarkable understanding of HM Treasury at the time—needs to be repeated for flood warning systems.
	Better understanding and prediction of flooding should lead to better planning for housing, agriculture and flood defences. That is essential not only to ensure that new urban developments associated with a growing economy and changing patterns of habitation—the noble Lord pointed out the example of Sussex—are not vulnerable to flooding, but also to allow for the effects of climate change, which are likely to increase the intensity of winter rains as well as to cause sea levels to rise, up to 0.8 metres in the coming century. Many international and government reports have emphasised that climate change will result in more frequent flooding of coastal communities and quite possibly the total abandonment of some of them by the middle of the century. A study of those drastic changes, which will affect the health and welfare of the affected communities, should encompass not only climatology, hydrology and oceanography, but also social, medical and political issues in order to explore how such potentially difficult decisions will be reached.
	I was pleased to learn recently that the Government Chief Scientist is taking an interest in these wide-ranging matters, but it is even more wide-ranging than that. Parliament will need to keep both the decisions and the decision-making process under continual review. That is particularly important in light of the current policy which states that these are essentially local issues. That point was also made by the noble Lord, Lord Renton.
	Technology and engineering can also contribute greatly to the direct reduction of flood damage through fixed and moving barriers, allowing controlled flooding into designated areas. Since those measures are expensive and may not always be funded in time, it is important to note that temporary barriers are now being considered for wider use in the UK, as they have been used to good effect in river basins on the Continent. The Government should be encouraged to conduct extensive trials here in the UK in order to familiarise engineers and the public and to ensure that the systems are used effectively in combination with appropriate and timely warnings. I suggest that the Environment Agency and DEFRA should encourage more public discussion and information on this development.
	Finally, perhaps I may ask Her Majesty's Government whether they are likely to change their policies on insurance against flooding in the UK, in particular whether in future those living in exposed locations will have to face much higher insurance premiums. No doubt the UK insurance industry will continue to behave responsibly both here and abroad, but it has expressed its wish to make changes and the Government will need to set out the overall structure.

Baroness Maddock: My Lords, there can be few of us who did not "brush" with the wide-ranging effects of flooding in this country last year. Many experienced the personal misery of a flooded home. Added to that has been the huge financial cost, not merely to individuals but to communities and businesses. Many Members of this House suffered disruption to transport. All that had a big effect on the economy. Less publicity is given to the ongoing effects of last year's flooding, including effects on the health of many people. Not only were the problems still being felt a few months later; they are continuing.
	The scale of the problem has been amply demonstrated in the increase in the number of areas that have become uninsurable for flood risk. Many factors contribute. British insurers highlight three: the frequency of rain; the fact that when it comes, there is much more of it because of climate change, which was referred to in the previous speech; and, it is claimed, poor maintenance of our flood defences and the inadequate protection of properties built in areas at high risk of flooding.
	I want to highlight a number of other factors which I believe are important. In recent years, there has been increased density in building. It is not merely a matter of the buildings themselves, but of the higher proportion of hard surfaces in many modern estates. And dare I mention the fashion for "hard gardens" that we see on many television programmes? All of these result in greatly increased run-off of water into the drains. People do not have to live on a flood plain to be affected. Furthermore, as a result of modern building there is a great deal more water going down the drains of individual houses. These days, people do not merely want one bathroom; they want two or three. Although modern estates will have new drains, they often feed into very old drainage and sewerage systems. We do not build them very differently, and we do not maintain them. Many are relics of the Victorian age. That point needs to be examined.
	More resources are needed for flood defence management systems. Maintenance plays an important part. As we have heard, climate change means that there is a need to spend more in this area. I want to refer to two matters which I believe can alleviate the risk of flooding, not merely in flood plains but in other areas. I shall refer to planning—in particular to building design and estate layout—and also to building regulations.
	The noble Lord, Lord Renton of Mount Harry, to whom we are grateful for introducing this debate, mentioned PPG25. I understand that this directive means that the susceptibility of land to flooding is a material consideration when planning consents are considered. Local authorities are also asked to take a sequential approach in the planning of house building, based on risk assessment. But as the noble Lord said, 27 per cent (by value) of planning applications which have already received consent are for areas where the land is known to flood.
	I understand that, under PPG25, the Environment Agency will monitor progress on planning decisions. However, it will not be able to direct planning authorities where it believes there is a high risk of flooding on land to be developed. I wonder whether the Minister heard a discussion on Radio 4 in October on the situation in Cambridgeshire. The county council has been deliberating on whether to build a new town near to the village of Oakington, which was recently the scene of severe flooding.
	Lawrence Rag, vice chair of the Council for the Protection of Rural England, voiced his concerns about the weakness of the planning system and also the weakness of the Environment Agency in that process. He was particularly critical of the inability of the Environment Agency to veto planning decisions when it knows very well that the site under discussion is prone to flooding. When the Minister replies, will he clarify how PPG25 will assist in the planning process as regards minimising the risk of flooding for new homes? Secondly, how can we deal with planning consents which have already been given in areas where there is a high risk of flooding?
	I turn finally to site planning and building regulations, with particular reference to drainage. What consideration have the Government given to the role of design in minimising run-off? What research has been done? Even new drainage systems are not designed to cope with low severity flood conditions. For example, in times of flooding, back-up through toilets and baths into houses could be avoided if we always built with one-way flat valves. Are the Government considering changes to the building regulations to take account of these matters? They affect not only those who live on flood plains, but people all over England. My noble friend Lord Greaves may refer to the fact that he lives on the side of a hill and has seen houses above him flooding as a result of run-off.
	I recognise that flood defences play an important part in limiting flooding. However, we need to examine planning and building regulations. They are just as important. I look forward to the Minister's response.

Baroness Knight of Collingtree: My Lords, we are all indebted to my noble friend Lord Renton of Mount Harry for bringing this matter to the attention of the House. I hate to say it, but I harbour a suspicion that the Government do not wish to know much about flood dangers, much less instigate measures to tackle the evil. Yet the appalling difficulties of having flood waters in one's house are almost incalculable. The misery of seeing treasured carpets ruined, soft furnishings, chairs and tables stained beyond redemption, and one's home becoming impossible to live in are almost unbearable. And let us not forget the foul, ghastly smell that pervades the whole house when it has been flooded.
	I must declare an interest, which is in no way a pecuniary one; and, thank god, I have never suffered the effects of flooding. I am president of the Nene River Flood Prevention Alliance, a group of interested people in my home area. They come together to try to ensure that planning committees recognise where local flooding can take place, but also to stop permission being given for new homes to be built in such areas.
	Northampton is one of the many areas which have suffered grievously from flooding in recent years. The alliance has worked and researched extremely hard, and I admire its members greatly. They have submitted firm evidence of a head of flood water gathering above Northampton. They have told the local authority that a drainage scheme which will store or drain the flood water is essential. They feel strongly—and, I believe, reasonably—that until that is done there should be a moratorium on further development in the area. Alas, no such moratorium is in sight. More and more houses are going up.
	I do not believe that the question of possible flood danger is considered properly when planning permission is granted for housing developments. In one area, warning was given that either a pond should be constructed before building commenced or pipes should be laid to the local river. But the river had no capacity to absorb further water and the pond was never made. However, the houses went up just the same. I should not want to live in one of them.
	I am told that the Environment Agency does not provide accurate surveys, merely computer-generated maps, and often old ones at that. Some are from 50 or 60 years ago, although many changes have taken place, not least house building. Many people do not realise the extent to which putting new houses in an area increases the flood danger, or makes it even more certain that there will be floods as more people move into the area.
	Old maps do not give a true picture. There should be a complete up-to-date survey of all river areas in the country, but I fear that that will not happen. Accounts of big money to be made are welcome, and heard, but no one wants to hear warnings of bad consequences. It is better not to listen. Builders or, dare I say it, Ministers know to be well out of the way before anyone notices the dangerous position that certain new houses are in. There is money in development and builders are aware of that.
	The Secretary of State is sometimes called in to give the go-ahead. But I am told that he sees no reports of flood dangers when he gives the green light. No survey of the dangers is submitted with the application or structure plan. The Water Resources Act 1991 says that the Secretary of State should have such information, but that Act appears never to be invoked. Much more notice is taken of house building quotas. Every local authority is virtually ordered to build a certain number of houses but the question of whether those houses will be safe from flooding never arises. Ministers never see reports on that, or so I am told. I should be delighted if the Minister were to contradict me.
	Mr Elliot Morley, the relevant Parliamentary Secretary, recently issued a press release on flooding. He made no mention of funding for infrastructure of flood storage reservoirs, although I should have thought that any press release on flooding would include that. He announced a funding increase for flood defence, which is up from £76 million last year to £114 million in 2003-04. But an insurance company, Norwich Union, pointed out that the £200 million already spent by local authorities on building and maintaining flood defences is barely half of what is needed. We still go on building homes in areas that are likely to flood.
	As my noble friend Lord Renton and others have said, the question of insurance is deeply worrying. The insurance companies are just not interested in paying for mistakes or in the lack of proper care in building housing estates. I fear that within a measurable time thousands of homes will become uninsurable and unsaleable. Then what will we do? Will social security help? Will people be rehoused on council estates? Will there be health care for depression? Many problems could arise from this issue.
	Last Wednesday I obtained from the Printed Paper Office the new White Paper on planning in local government regions. I rushed along to get it as quickly as I could. I welcome its intention to speed up the planning process and I am pleased that the flaws and inefficiencies in the present system will be attacked. But I was disappointed not to see anywhere in its 64 pages a reference to the vital need to bring flood hazard scrutiny into planning. Page 31 gives 12 points that should be included in a model planning application. There should have been 13, and the thirteenth should have mentioned land drainage and flood dangers. It is said that 13 is an unlucky number, but it will be worse than unlucky if someone buys a house that is sitting on a swamp.
	I should perhaps give notice that I have further criticisms of the White Paper, but I shall reserve those for another day. My motive tonight is to support my noble friend and to beg the Government to recognise the seriousness of what we are saying.

Lord Greaves: My Lords, we have heard some fascinating speeches about the problems of flooding. I want to refer more widely to the problems of the management of river basins and rivers generally. We are talking about flooding on coastal plains and fluvial flooding from water courses. Floods can happen anywhere, as my noble friend Lady Maddock said. I live on a steep Pennine hillside and we were astonished a few years ago when it opened up and turned into a mass of foaming water. Fortunately a row of houses above where we live managed to act partly as a dam and the water poured through the back door and out the front, and was fortunately diverted into the lane.
	Most flooding occurs on flat land and areas that most people recognise as flood plains. It occurs mainly in the lowlands where the rivers flow across wide plains that turn into coastal flood plains, which are dear to the heart of the noble Lord, Lord Renton of Mount Harry.
	There almost certainly has been increased flooding because of climatic change. But we should remember that only about 10 years ago we were all concerned about summer droughts and falling water tables. Everyone was worried that the rivers were drying up. That may happen again because climate patterns are cyclical. There is a danger that we may experience a dry period in a few years' time and everyone will think that flooding is a thing of the past. It is important to regard it as something that will happen even if there are short-term fluctuations.
	Flooding is part of the natural processes of river basins. That is now beginning to be understood much more widely by agencies and government. Ten years ago no one thought about looking at flooding as a whole across the river basin, from the catchment areas to the run-off, and infiltration that occurs and which often reappears further down the system as ground water. What happens in the upper reaches of rivers is integrally linked to what happens in the middle reaches and the lower flood plains as they enter the sea. That is vital to this question.
	We have to understand that the present drainage network is not natural. It looks and feels natural and people think that the rivers are natural, but the streams and rivers in this country have been controlled, straightened, contained and, in many cases, modified by development. Some of it is large-scale such as industrial development in cities and some of it is small development, such as bridges, and so on.
	The flood plains that we now see are unlike those that would have existed a few thousand years ago when the river courses were split up and braided. There were lagoons, flood channels and lakes, and all kinds of natural flooding occurred. That has been stopped in order to allow efficient farming, urban development and communications.
	The issue is now much more widely understood. The flooding last year in the Vale of York and the drainage basin of the Ouse and the Derwent is closely related to what happens in the uplands where the famous Yorkshire tributaries of the Ouse and the Derwent in the North York Moors originate. Flooding occurs in ways that we do not want because of the lack of a sufficient amount of active flood plain, or washlands. Often it is connected with developments lower down in the estuaries.
	PPG25 is welcome in that it recognises these processes. It states that
	"planning policies and decisions should recognise that flood risk management needs to be applied on a whole-catchment basis and should not be restricted to flood plains".
	The introduction states:
	"High-water events in rivers and coastal waters are natural processes that play an important role in shaping the natural environment. The flood damage that results to people and property is a consequence of previous human decisions about settlement and land use"—
	and, indeed, the decisions that we are still taking.
	That is a vital concept when dealing with flooding, but we need to go much further than merely controlling new developments and considering whether they are in appropriate places and of the appropriate type. In some cases we may need to reduce the nature or intensity of the agricultural land use in the catchment area where the rivers originate. Draining moorlands, draining and improving upland pastures and increasing the run-off, which are all thought of as improvements to land, may be having a significant effect on what happens downstream. If so, there has to be a system for looking at the issue as a whole.
	We may need to allow some intensively cultivated farm land on flood plains—perhaps some of the best farm land in the country—to revert to much less intensive land use. It might revert to grazing land, as used to happen on marshes and meadows, so that it can act as overflow and as reservoirs. We may be looking at creating new wetlands, which would have environmentally desirable spin-off effects. That type of habitat has been severely reduced over the past 300 years, and particularly in the past 50 years. If that is to happen, the people who own, farm or otherwise use that land now have to be compensated for the new uses. At the moment there are very few ways in which that can happen.
	There was an interesting discussion in the Environment, Food and Rural Affairs Select Committee in another place on 28th November, when Elliot Morley, the Minister, was quizzed about the subject and asked whether the model of the national forest could be used for that purpose. His answer was:
	"Not at this stage but all options are open as far as I am concerned. The idea of flood storage catchment and using farm land for that is a very interesting one, and it is certainly one that we are giving very serious thought to in river plains and river catchment areas".
	It is good news if the Government are looking at the issue seriously. It may currently be possible to use some agri-environmental money for that, but the scale and nature of it is nothing like what is required. It would be interesting to hear the Minister's comments on how far the Government's thinking is going.
	My final point is that any management of river basins has to have an administrative basis. One of the problems of current flood control and management is the large number of different agencies and bodies involved. River basins by their nature rarely coincide with neat administrative boundaries. They would not be suitable as administrative boundaries in many places because of far more important factors. My party's policy of regional government, which seems now to have some favour with the Government, would be a way of integrating many of the agencies and organisations involved in dealing with flooding. That should be seriously considered as part of the responsibilities of new democratic regional authorities in England if, as we hope, they are eventually formed.

Lord Berkeley: My Lords, I congratulate the noble Lord, Lord Renton, on initiating a most interesting debate. I do not have first-hand experience to declare of having been subject to a flood—yet—but I am a civil engineer and I look at the issues from my experience in the construction industry.
	Two problems have been identified tonight. One covers the existing problems of houses, run-offs and agriculture and the other relates to new developments on what might be called flood-susceptible areas or flood plains.
	It is extraordinary that many existing properties on flood plains may have to be abandoned because they are uninsurable or uninhabitable. It is also extraordinary that we have not done more to sort out the agricultural problem that several noble Lords have mentioned, because it is not as if we are short of food in this country any more and have to cultivate every square foot of land. There is plenty of land that could be used.
	Several noble Lords have referred to the problems caused by increased quantities of roads and paved areas. I recall a major flood of the River Mole in the lower Thames area about 30 years ago, which flooded vast areas of Molesey near Kingston. It was obvious that the enormous development in the 1930s had caused all the water to run off into the river rather than being soaked up in the good old bog.
	We should not forget the problem of sea floods. My understanding is that the Environment Agency is no longer protecting land in certain areas. That is fine for those who do not happen to live in those areas. Occasionally we see high profile buildings falling into the sea. I was interested in the comments of my noble friend Lord Hunt that the sea level is going to rise by 0.8 metres—that is about two feet and six inches—in 100 years. I wonder whether my noble friend the Minister can hazard a guess as to how much of England and how many properties will be flooded if that happens. I do not have a clue, but it would be interesting to think about.
	That leads on to the question of whose fault it all is. Is it a question of caveat emptor? Should compensation be payable? Should the taxpayer be asked to compensate those who suffer from higher floods and higher seas? Would they then argue that governments collectively were responsible for the cause—global warming—and should therefore contribute to some general compensation? That is an interesting question. I do not know whether my noble friend has an answer, but the question will come up more and more.
	I was astonished to hear the noble Lord, Lord Renton, say that 27 per cent of planning applications are on coastal plains. That confirms my view that the pressure on local authorities for major development is very hard to resist. I have also started to read the new planning documents referred to by the noble Baroness, Lady Knight. There are proposals to remove or reduce the scope of county councils, which are probably better placed than district councils to have a view on the consequences of floods. We shall probably debate that next year.
	Another example close to your Lordships' House came to my attention a year or two ago. There is a great big development in Battersea. The river wall along both sides of the Thames was built before the Thames flood barrier was completed. It was designed to keep the river out of London. The developer was supposed to build the flood wall all the way along, but he decided to put a nice cast iron fence by the Battersea development instead so that those living in the ground floor flats could see the river. That is fine, as long as you do not live in the house one row behind, as I do sometimes. I wonder what might happen if they do not shut the door. Why did not the council, the Port of London Authority or somebody tell the developer to put the wall up? It may be that they did and that it has been sorted out. That is another example of the enormous pressure on local authorities, which I am not sure they are strong enough to resist.
	As to assessing the risk of a flood, according to the noble Lord, Lord Hunt, the Institution of Civil Engineers no longer refers to a 100-year flood but to a one-in-100 risk. My experience of construction sites near rivers is that one might have planned for no floods during a two-year period but there always were. I reached the conclusion that the risk was of a two-year flood. That exemplifies how difficult it is to get the calculations right. I am not sure what can be done because floods are a combination of rainfall and run-off. It is nice to get flood warnings but it is much nicer not to have a flood at all. I am not sure how we get there.
	What are the Government doing to prevent the causes of flooding? Your Lordships have mentioned run-off, rain and high sea levels—probably all caused by global warming related to CO2 and energy policy. There is currently a government review, presumably being undertaken by the Department for Trade and Industry, but it appears that there is a parallel report from the Cabinet Office Performance and Innovation Unit, which the Financial Times summarised on 13th December. Perhaps my noble friend can explain why two reports are being produced simultaneously and the relationship between them. I am sure that there is a terribly good reason. The Financial Times reports that the report
	"proposes a substantial increase in investment in wind-farms and other renewable energy projects, greater energy efficiency and more investment in energy efficient combined heat and power projects".
	The report says that the PIU report attacks
	"the institutional barriers to progress. These include heavy financial penalties imposed by the new electricity trading system on small and intermittent (typically wind) generators".
	Lord Montagu and I visited a house in Oxford that had solar power panels installed on its roof. It cost quite a lot of money but not an enormous amount. What stunned me was that the electricity board generously offered to buy the power at less than three times the price that the board charged. The board was also going to charge £30 every time the meter was read—which could be done at least every hour. Things may have got a bit better since then but there is a long way to go before people will be encouraged to build wind farms.
	The Financial Times commented also that
	"the government may have to return to its previous support for congestion charging if development of new fuel technologies based on hydrogen fail to deliver"
	Does my noble friend agree that congestion charging in London and elsewhere is a good thing? It is a tenuous argument but the question is worth asking.
	I remind your Lordships that the recent Environment Agency discussion paper suggested that it should be possible to reduce the UK's primary energy input by 50 per cent by 2050—which would cut enormously the risk of floods as well as the risks posed by CO2.

Baroness Miller of Chilthorne Domer: My Lords, I come from Somerset which, as one of the lowest lying counties of the United Kingdom, has long experience of flooding. I declare an interest as a Somerset county councillor and because my husband is chairman of the flood defence committee.
	The noble Lord, Lord Renton, and my noble friend Lord Greaves mentioned working with nature. The Government need to pursue that approach with all speed. I would have felt happier if the Unstarred Question had asked the Government what measures they are taking for the long-term management of floods. We cannot continually defend ourselves against what is clearly a huge flowing-down and flowing-in tide. It is a question of making sure that the floods are in the right places, not the wrong ones.
	Somerset is starting to pilot that approach in the River Parrot catchment area. I am delighted that Sir Don Curry's Policy Commission on Farming and Food and the Minister with responsibility for flood management, Mr. Elliot Morley, have been to Somerset and were encouraged by what is happening there. I hope that will become a national model.
	I was surprised by the report "Learning to Live with Rivers" from the Institution of Civil Engineers because, like many people, I imagined that engineers take purely an engineering approach to problems. Instead, the report identified that we must learn to live with rivers and that we cannot always control them. Perhaps the Minister could comment on the ICE's belief that there is a great skills shortage and on whether there is a sufficiency of people to cope with the volume of work that must be undertaken.
	Local drainage boards, flood defence committees and others bring years of local experience but Government financing for their work has become extremely opaque. When priorities are set, local people need to know why those choices were made. Rivers do not necessarily respect local government boundaries. Somerset's river catchment covers the whole county but Surrey and Sussex have to share resources. The noble Lord, Lord Renton, may agree that while Surrey may understand the problems of Sussex, the democratic input is opaque.
	I shall not rehearse the issues surrounding PPG25 except to say that retrospective applications are extremely important. I shall be interested to hear the Minister's views.
	What is also important is the Minister's ability to consider how to shift payments to farmers for long-term flood storage. At present, only environmentally sensitive areas that can benefit waders and similar birds qualify for flood storage payments. If we expect farmers to store floods on land in areas where the water wants to be, we must move away from that approach. It may benefit the wildlife but we cannot be so selective as to allow only environmentally sensitive areas to qualify.
	As to agricultural practices, perhaps the Minister agrees that countryside stewardship or a completely new scheme should be introduced, to compensate farmers who undertake flood storage on their land for the good of the public and towns downstream. The name Somerset derives from the fact that it was agriculturally useful only in the summer, as it was essentially a county of islands in the winter. Although I would not want to return to those days, I believe that we can learn something from previous conditions and that we can benefit from controlling water in a natural manner when it is possible to do so.
	The RSPB believes that continually seeking to repair sea defences is a losing battle. It has also strongly stated that it would be much better if the Environment Agency were given power to purchase from farmers land that is immediately adjacent to the sea. As the agency is currently unable to buy such land, it must continue instead to repair flood defences. Substantial sums could be saved in the long term if the agency had the power to buy such coastal land from farmers who wish to sell.
	I have a couple of specific points on finance to which I should like the Minister to respond. The 2000 comprehensive spending review allowed a notional increase of 4 per cent for flood defences, whereas spending by flood defence committees increased by 10 per cent. Although the Institution of Civil Engineers has suggested that the budget for flood control should be doubled, nothing in the Pre-Budget Report suggests that there will be such an increase.
	Currently, councils obtain money for flood defence in precepts. Therefore, those sums count in the figures used to calculate the council tax benefit limitation subsidy. In the recently published paper entitled Strong Local Leadership, the Government proposed to phase out that limitation. Although the proposal is welcome, the limit may not be removed for a couple of years. Consequently, local authorities that are responding to the Government's call to do more about flooding may well be penalised.
	I ask the Minister to reply to those two points. Additionally, does he think that the next comprehensive spending review is likely to provide the type of increase that we shall need to tackle the problem? Although it is very likely that the spend will be very high in the next four or five years, it will taper off as we become better at long-term flood management.

Lord Glentoran: My Lords, I thank my noble friend Lord Renton of Mount Harry for asking this Question and allowing us to have what I hope the Minister will agree is a very comprehensive and objective debate.
	Last year, 10,000 properties were flooded. Such devastation is sufficient to remind us that flooding is a problem that cannot be put on the back burner. Time is running out for proprietors whose insurers have imposed a time limit on their policies, and for those whose property remains unprotected against flooding the possibility of material damage and real distress is high, especially at this time of year. Promises of long-term solutions alone are not enough. As many noble Lords have pointed out, although long-term strategy has a crucial part to play in the broader approach to the flooding problem, we should now ask ourselves whether vulnerable areas are any better protected than they were last year.
	The good news is that some of them are. The report of the Institution of Civil Engineers suggests that 270,000 properties are now successfully protected. However, although that progress is most welcome, there are numerous reports from forecasters, from residents who suffered such misery last year and from professional bodies such as the association of insurance brokers suggesting that the problem is likely to become much worse. I should declare a small interest as, last year, my nephew in Hampshire was twice flooded out. Moreover, as the noble Lord, Lord Berkeley, clearly explained, in the not too distant future, sea levels could rise by, I believe, two and a half feet. He also said that freak storms occur no longer every 100 years but—at least in his experience—whenever he is on site.
	Seriously, we have to ensure that a carefully considered and adequately funded policy is in place so that we are ready for the storms when they come. That entails thinking about protecting property now, in the short term. Residents and businesses already feel abandoned. Although they acknowledge that flooding is a natural phenomenon and cannot be prevented—your Lordships may not agree with that, as some speakers have suggested ways in which floods could be prevented—they feel that the Government are not doing enough to protect them. We should not allow that impression to remain, however difficult it is to deal with those concerns.
	I turn now to the more long-term possibilities. I am most grateful to my noble friend Lord Renton of Mount Harry also for focusing on the building of new houses on flood plains. Many noble Lords have spoken about various aspects of such building, which is an important issue. I understand that, earlier in the year, the Government issued guidelines on the subject. The principle encapsulated in those guidelines is both simple and welcome, directing development away from high-risk areas in a risk-free and preventive manner. The consequence is that money will be saved and distress avoided.
	The Government acknowledged at the time that such guidance was overdue, and I agree. However, guidance alone will not be effective in dealing with current concerns. Nor is it likely to be put into practice uniformly across the country. The guidelines will do little to stop development in areas that already have planning permission. In this debate, however, several noble Lords suggested what action should be taken in areas where planning permission has already been given although it is known that there is a flood risk.
	In his Answer to a recent Starred Question on this subject, the noble Lord, Lord Whitty, said that development on flood plains has been "tightened up". He also said:
	"It is up to individual planning authorities—
	we have heard a lot today about individual planning authorities and the pressures that local authorities are under—
	"when considering particular planning applications, to bear those matters in mind".—[Official Report, 7/11/01; col. 199.]
	I wonder whether the division of responsibility between local authorities, DEFRA, the Environment Agency, DTLR and internal drainage boards will mean that guidelines are not followed as closely as they might be. That is hardly joined-up government. I understand that the Government are considering the need for a flooding direction under planning Acts. I should be interested to know whether the Government have made any progress in their consideration.
	The Institution of Civil Engineers report also called for the establishment of a new executive agency which would have extra powers over other operating authorities. The authors clearly saw the drawbacks of the current division of labour and responsibility. They suggested that it might have money allocated to it directly as part of an overall increase in capital investment. I should be grateful if the Minister would give us some idea of the Government's thinking in that area.
	There is another concern that the planning guidelines do not address. If we continue to build on greenfield sites outside flood plains, the ability of land and rivers to absorb excess rainwater will reduce dramatically. I believe that the noble Baroness, Lady Maddock, talked about "hard gardens" in that respect. Government building targets are such that development is going ahead on greenfield sites. As long as that continues, it will detract from any positive measures such as those outlined in July—yet more evidence to suggest that flooding policy will be most effective if we are mindful of a broad range of issues.
	I mentioned insurance a few moments ago, as did, I believe, the noble Baronesses, Lady Maddock and Lady Knight, and the noble Lord, Lord Renton of Mount Harry. The Association of British Insurers has commented on numerous occasions on the severity of the flooding problem. Insurance firms have said that they will not cover beyond the end of the year for more than 1.7 million homes unless the Government take drastic action to boost flood defences. The economic implications for those areas are significant, dare I say awful? It would be a dreadful state of affairs if almost all properties located near rivers became uninsurable, as I believe the noble Lord, Lord Berkeley, said. The industry has hinted that that may become a reality in the future.
	The consensus is that more money is required and required quickly if vulnerable areas are to be protected from material and economic disaster. As well as emphasising how serious the situation is, and is likely to become, the Institution of Civil Engineers has made two additional points that I wish to raise. The first concerns abandonment. It has been suggested that residents and businesses might abandon those areas that are most under threat, allowing the areas to return to their natural role as emergency reservoirs. I think that the noble Lord, Lord Greaves, spoke of a strategy for settlement and land use in the future and the management of it. I should be interested to know whether the Government are considering abandonment as a possible course of action.
	The second point concerns the inclusion of human distress as a factor in future policy calculations. It has been argued that a wholly economic approach to assessing the benefits of flood mitigation has overlooked the human misery caused by flooding. I wonder whether that has been considered by the Government in their assessment of future flood mitigation measures.
	Finally, I should like to reiterate my concern that this is not just about future development but about properties that already exist and are already under threat. People living in vulnerable areas should not feel abandoned. In the longer term, by taking a broad view of the problems associated with flooding, we are perhaps more likely to come up with a series of measures that address people's real concerns and problems. By a broad view, I mean considering the implications of flooding in every aspect. The AA, for example, warned recently that long-term flood damage to Britain's roads was responsible for an increase in the number of accidents across the country. Last year's widespread flooding caused severe damage to the foundations and surface quality of many roads and several are in need of extensive work as a result. We should address that in the context of other concerns.
	Promises for the future have been plentiful. New guidelines are welcome, although, as I have mentioned, their effect could well be limited. I hope that swift action can also be taken to avoid a repetition of last year's costly experience in the short term and in the future.

Lord Whitty: My Lords, I thank the noble Lord, Lord Renton of Mount Harry, for raising this debate, which has been wider ranging than perhaps he or I anticipated. I hope that I can answer some of the points, but certainly not all of those raised tonight.
	The key issue here is that flood defence, and the way in which we deal with the growing problem of potential floods, is a long-term business. There are clearly short-term issues, but we have to have a long-term strategy. We need to look ahead and to consider what defences will be needed in 10, 20 or even 50 years time. As the noble Lord, Lord Glentoran, said, that requires a long-term strategy.
	It also means that there will be some areas that we cannot defend. It is no use committing future generations and current resources to maintaining unsustainable defences or unsustainable management systems. As my noble friends Lord Berkeley and Lord Hunt pointed out, sea levels are rising and climate change is bringing an increased incidence of extreme weather. We need to ensure that we have a viable long-term approach to the matter. We also need to ensure, both in the long and the short term, that defence in one place does not create additional pressures and problems elsewhere. So sustainability and a long-term approach are core to our strategy.
	It is true that the floods last year were the worst most of us can remember. Indeed, it may be a sign of things to come with the increased unpredictability of the weather. We cannot prevent all flooding whatever management systems we introduce, but we can and must prepare for it. We also need to keep the problem in perspective. At present there are about 1.8 million people living at risk of flooding in England alone. Approximately 300,000 properties—the noble Lord, Lord Hunt, put the figure at 250,000, but it is slightly higher than that—were at direct risk last year, but the vast majority of them were protected by defences. The flooding of 10,000 properties—tragic and devastating as it was for those living in them—needs to be seen against those numbers. The devastation to residences is clear and all of us have sympathy for those affected, but it is also clear that there is a balance of risk here.
	The nobles Baronesses, Lady Knight, Lady Maddock and others, pointed out the cost of the disruption and the terrible devastation, which was graphically described by the noble Baroness, Lady Knight. That indicates what people experience in such circumstances. But we need to look at how we can identify better those areas which are at most risk and how we can develop a strategy for dealing with them.
	The increase in flood risk is in part to be dealt with by improvement in flood defences, in part by approaches through planning policy and, as the noble Lord, Lord Greaves, indicated, through fluvial area management. PPG25 marks a new and more sustained approach to planning guidance which the department hopes local authorities will follow.
	The noble Baroness, Lady Knight, emphasised the need for accurate flood plain maps and for anticipation of flood risk. That is possible in some cases. More information is now being made available, both through local information and the Internet. Those measures are constantly being improved and updated. A great deal of that information is therefore available to residents and authorities.
	PPG25 contains guidelines on developments as regards flood plains. They are clearly identified and local planning authorities are paying increased attention to flood plain risks. The noble Baroness, Lady Knight, indicated that she believed that the Government were perhaps not giving as much attention to this matter as is needed. The noble Baroness, Lady Miller, and others indicated that they thought the resources were inadequate.
	We are investing very substantially in flood and coastal defences. Over £400 million a year is being spent in England. That will increase to £450 million by 2003/4. The Government fund the lion's share through DEFRA funding and through DTLR local government funding. DEFRA funding is to increase by 70 per cent over the next couple of years. Local authority funding is also increasing significantly ahead of inflation.
	The defences damaged last autumn have been repaired and reinstated. The Government have met most of the cost. They provide as least as much protection as last year and, in many places, better protection than last year. We have also provided additional funds to accelerate major river flood defence schemes in a number of areas. That would not have happened for a number of years had we not stepped up the provision of resources. We have also been able to put in place new catchment flood management plans to ensure that a strategic approach is adopted to flood risk and flood management on a catchment basis. This follows the line of the earlier initiative on shoreline management plans for the coast.
	Building new and improved flood defences is, of course, a very important means of reducing flood risk. It is not always a sustainable proposition to build defences against every eventuality, but the impact of flood risk, even in those circumstances, can be reduced. That is the object of these plans. The Environment Agency is developing the initiative through five pilot schemes, with a view to preparing a plan for each new catchment area in the medium term.
	The noble Lord, Lord Greaves, was concerned about the overall catchment approach. I can assure the noble Lord that that approach is being developed substantially and that flood storage areas already form a significant component part of the flood defences of both rural and urban communities. In the urban context, for example, the scheme for Lincoln was developed in the early 1990s and was first used in earnest in response to last year's floods. The Environment Agency is required to exercise a general supervision of all those flood management schemes.
	The noble Baroness, Lady Miller, reminded us that we cannot expect to remove all flood risk, but that we should introduce a flood management approach. We agree. In particular—

Lord Renton of Mount Harry: My Lords, before dealing with that point, will the Minister comment on my suggestion that the Bellwin scheme should again be considered, which would give local authorities a greater possibility of obtaining payment for the replacement of capital assets? The recent report on Bellwin showed that inadequate money is available for the restoration of capital assets, as a result of which some local authorities will severely suffer.

Lord Whitty: My Lords, the Government have significantly increased the formula in relation to Bellwin from the 85 per cent payment by central government to a 100 per cent payment in post severe-flood situations. I agree that there is some concern about balancing the way in which that money is spent and we shall certainly keep that matter under review. In particular, we need to ensure that the bulk of the money is paid in effective schemes—not all of which will be capital and some of which will be revenue management. However, we need to ensure that money given through the Bellwin formula is deployed effectively.
	The noble Lord, Lord Renton of Mount Harry, mentioned Lewes—an example of a particularly difficult area for which we need a long-term approach, especially having regard to the severe complications relating to heritage requirements as well as the straightforward defence of buildings. The noble Lord also referred to the role of county councils and the amount of precept that they had determined. County councils and flood management committees bear some responsibility to raise adequate resources, and there is a responsibility on central government to support those schemes. The situation in Sussex was particularly bad last year. Over the next few years we shall need to develop an overall strategy for protecting Lewes and other neighbouring areas in East Sussex.
	The noble Lord, Lord Renton, also raised the question of the impact of soil erosion on effective intensive agriculture in Sussex, a problem which also occurs elsewhere. That matter was also referred to by the noble Lord, Lord Greaves, and my noble friend Lord Berkeley. It is certainly true that last autumn's exceptional rainfall led to a much more widespread and noticeable erosion and run-off from farmland in many parts of the country, particularly in the South- East. That was a demonstration of a localised, but nevertheless very severe, long-term problem. The Government have therefore taken a number of initiatives to improve soil quality, including issuing best practice guidance and information packs to farmers and managers to try to develop an approach that limits run-off from agricultural land. The problem of diffuse origin of soil erosion and its effect on the water system is significant, and we need to take it into account as we develop a new approach to the management of agricultural land as a whole.
	Flood warning arrangements are also being improved—322,000 more people had flood warnings this year, compared with last year. That indicates an improvement in the prediction system at local level.
	Many noble Lords have referred to the report by the Institution of Civil Engineers, which we in DEFRA commissioned. It gives some indication of the way in which we need to move forward, and we need to take its recommendations into account.
	Several noble Lords referred to insurance and development controls. Clearly, there is a problem with the availability of flood insurance, which is of great concern to many in the flood plains and to the covering local authorities. We maintain close links with insurance companies and are determined to ensure the continued availability of affordable flood cover. There is agreement among ABI companies that in all but exceptional circumstances they will continue to provide flood cover over the next two years. They have undertaken to investigate any alleged breaches of that agreement by members.
	However, there is clearly a long-term insurance problem. Insurance companies say that more resources from local authorities and central government should be used in flood defence. They are also concerned about development controls. However, they apply by and large to future property rather than property that is already there. In that regard, there is a difference in terms of what our approach can deal with. PPG25 deals with future developments more robustly than was the case with earlier planning guidance. We also have a responsibility for ensuring the sustainability of the flood defence arrangements in relation to those areas that have already been built on.
	Future building on functional flood plains should be wholly exceptional in all circumstances. That is the responsibility of planning authorities. We have a responsibility for those who already live on flood plains—

Baroness Maddock: My Lords, I am conscious that we are about to finish, but the Minister has not discussed planning permissions that have already been given in flood plains but where the property has not yet been built. We should deal with that serious matter, and I hope that he will comment on it.

Lord Whitty: My Lords, I am not sure that I can give a general answer. Planning authorities and the call-in system have some responsibilities in that respect, in terms of the Secretary of State and the local authority. Where only outline planning permission exists, there is a responsibility on planning authorities to review the situation.

Baroness Miller of Chilthorne Domer: My Lords, I realise that we are nearly out of time. Will the Minister undertake to write to me on the question of council tax benefit subsidy limitations?

Lord Whitty: My Lords, that matter is not the direct responsibility of my department but I shall ensure that the noble Baroness gets a reply.
	I believe that I have gone over my time. I thank the noble Lord, Lord Renton of Mount Harry, and other noble Lords who have participated in this debate.

Lord Berkeley: My Lords, before the Minister concludes, will he clarify one matter? After September 11th, when insurance companies refused to cover airlines because of the greater risks, the Government stepped in and contributed to premiums to keep people flying. If insurers will not insure people's homes—the noble Lord, Lord Glentoran, mentioned the figure of 1.7 million—should not the Government step in to ensure that people can continue to live in those homes?

Lord Whitty: My Lords, I had occasion to say to the House in an entirely different context that the Government are not the insurer of last resort. A temporary—and somewhat unique—exception to that was made in relation to airlines, but that is not a sustained or sustainable position. It is not the Government's job to provide insurance for householders, but it is perhaps the Government's job, along with the insurance industry, to try to ensure that, so far as possible, such insurance is available and that local and national government observe their responsibilities in relation to flood management and flood defences, where that is sustainable. Where it is not sustainable, some degree of strategic retreat occasionally has to form part of the strategic plan.

House adjourned at half-past nine o'clock.